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Lansburg v. Federal Home Loan Mortgage Corp.

United States District Court, D. Arizona

October 17, 2017



          H. Russel Holland, United States District Judge.

         Cross-Motions for Summary Judgment

         Defendants move for summary judgment.[1] This motion is opposed and plaintiffs cross-move for summary judgment.[2] Plaintiffs' cross-motion is opposed, and defendants move to strike facts asserted in plaintiffs' response to defendants' motion for summary judgment.[3] Defendants also request that sanctions be imposed against plaintiffs for filing a sham declaration.[4] Defendants' motion to strike and request for sanctions is opposed and plaintiffs request that sanctions be imposed against defendants.[5] Oral argument was requested and has been heard.


         Plaintiffs are Jeanette K. Lansburg and Larry J. Encinas. Defendants are the Federal Home Loan Mortgage Corporation and Saxon Mortgage Services, Inc.

         On February 1, 2007, plaintiffs executed a Deed of Trust[6] in favor of Taylor Bean and Whitaker Mortgage Corporation (“Taylor Bean”) which encumbered the real property located at 14394 West Shaw Butte Drive, Surprise, Arizona (“the Property”). The Deed of Trust contained a power of sale provision in the event of a default under the Deed of Trust.[7]

         In March 2008, plaintiffs entered into a loan modification with Taylor Bean in order to prevent a foreclosure. This loan modification did not limit the default remedies available under Section 22 of the Deed of Trust.

         Several months after this first loan modification, plaintiffs again began experiencing financial difficulties and in February or March of 2009, plaintiffs sought a second loan modification from Taylor Bean. It is this second loan modification attempt that is at issue in the instant motions for summary judgment.

         On May 6, 2009, Taylor Bean advised plaintiffs that they might qualify for a loan modification under the Home Affordable Modification Program (“HAMP”).[8] HAMP was started in 2009 “to incentivize banks to refinance mortgages of distressed homeowners so they could stay in their homes.” Corvello v. Wells Fargo Bank, NA, 728 F.3d 878, 880 (9th Cir. 2013). To start the HAMP loan modification process, “borrowers supply information about their finances and their inability to pay their current mortgage to the servicer, and the servicer ... evaluate[s] whether the borrowers qualify for a loan modification.” Id. Plaintiffs supplied this initial information to Taylor Bean sometime in May 2009.

         “For borrowers who appear eligible to participate in HAMP, the servicer then prepares a” Trial Period Plan (“TPP”). Id. “The TPP requires borrowers to submit documentation to confirm the accuracy of their initial financial representations, and to make trial payments of the modified amount to the servicer.” Id. at 880-81. On June 2, 2009, plaintiffs were advised that they were eligible for HAMP and they were provided a TPP to sign.[9] Plaintiffs were advised to sign the TPP and send two signed copies of the TPP plus their first trial period payment of $1739.70 to Sparta Special Servicing no later than June 12, 2009.[10]

         The TPP provided that “[i]f I am in compliance with this Trial Period Plan [“TPP”] and my representations in Section 1[11] continue to be true in all material respects, then the Lender will provide me with a Home Affordable Modification Agreement....”[12] The TPP provided that “[t]his Plan will not take effect unless and until both I and the Lender sign it and Lender provides me with a copy of this Plan with the Lender's signature.”[13] The TPP required plaintiffs to make three trial payments of $1739.70.[14] The TPP provided that the payments were due on June 12, 2009; July 1, 2009; and August 1, 2009.[15] Lansburg handwrote a note on the TPP, asking if the July and August payments could “be paid by the 8th of the month?”[16] Lansburg testified that she never received anything in writing confirming that plaintiffs could make the July and August payments on the 8th of the month but that she did receive verbal confirmation.[17]

         The TPP further provided that

[i]f prior to the Modification Effective Date, (i) the Lender does not provide me a fully executed copy of this Plan and the Modification Agreement; (ii) I have not made the Trial Period payments required under Section 2 of this Plan; or (iii) the Lender determines that my representations in Section 1 are no longer true and correct, the Loan Documents will not be modified and this Plan will terminate. In this event, the Lender will have all of the rights and remedies provided by the Loan Documents, and any payment I make under this Plan shall be applied to amounts I owe under the Loan Documents and will not be refunded to me[.[18]

         The TPP provided that the Modification Effective Date was “the first day of the month following the month in which the last Trial Period Payment is due....”[19] It is undisputed that the Modification Effective Date for plaintiffs' TPP was September 1, 2009.

         Plaintiffs signed the TPP on June 10, 2009 and sent it, along with their first trial period payment, to Sparta Special Servicing. Plaintiffs' check (check number 1109) for their first trial period payment was made out to Sparta Special Servicing, had plaintiffs' Taylor Bean loan number in the memo line, and was endorsed by Taylor Bean.[20] This check cleared plaintiffs' checking account on June 18, 2009.[21] Plaintiffs' check (check number 1112) for their second trial period payment was dated July 7, 2009, was made out to Sparta Special Servicing, had plaintiffs' Taylor Bean loan number in the memo line, and was endorsed by Taylor Bean.[22] This check cleared plaintiffs' checking account on July 16, 2009.[23]On July 7, 2009, plaintiffs filed for Chapter 7 bankruptcy protection.[24]

         On August 6, 2009, Lansburg emailed Taylor Bean to advise that she was getting paid the next day (August 7) and would be overnighting plaintiffs' third trial period payment.[25]Lansburg testified that she had no evidence that she overnighted the third trial period payment the next day, that she did not “think [she] kept those receipts.”[26]

         Lansburg wrote check number 1118 on what appears to be August 8, 2009, for $1740.[27] Check number 1118 was made out to Sparta Special Servicing and had “Aug Pmt” in the memo line.[28] Plaintiffs' Taylor Bean loan number was written above the “Aug Pmt” notation, but was crossed out.[29] Above the crossed-out Taylor Bean loan number, plaintiffs' Saxon loan number was written.[30] Check number 1118 did not clear plaintiffs' checking account until September 14, 2009.[31] Check number 1118 was endorsed by Saxon.[32]

         On August 19, 2009, a “welcome letter” was mailed to plaintiffs advising them that Saxon was taking over the servicing of their loan.[33] The letter advised that Saxon would start accepting payments on August 11, 2009.[34] The letter further advised that “[t]here may be an initial posting delay due to the servicing transfer, but it will not negatively impact your payment record.”[35] “Any funds sent to Taylor Bean during the time period that servicing was being released would have been placed in suspense and forwarded to Saxon.”[36]

         On August 19, 2009, Lansburg hand wrote some notes on a copy of her August 6, 2009 email. The notes indicated that plaintiffs' loan payments should now be sent to Saxon at a Fort Worth, Texas address and that plaintiffs' loan number was now 2000558478.[37]

         On September 4, 2009, Lansburg called Saxon and “said she had just completed her 3rd pmt of her HAMP trial, but the check hasn't cleared yet.”[38] The Saxon representative advised Lansburg that “we are in the process of having those checks endorsed so that's probably the reason.”[39] Lansburg advised the Saxon representative that “she is mailing her adjusted pmt today” and the representative gave Lansburg “the correct address.”[40] In her notes about this phone call, Lansburg indicated that she spoke to Courtney Brown who told her to mail her payments to an Irving, Texas address and told her that Brown “will notify the dept & let them know we made our 3rd & final trial pmt.”[41]

         On September 9, 2009, Lansburg called Saxon and advised that “she's completed all 3 pmts of her HAMP trial, but one still hasn't been cashed.”[42] The Saxon representative advised that she “would revw w/ my mgr, the HAMP mgr and our attys and c/b this afternoon.”[43] On September 9, 2009, another Saxon representative noted that “Borrower is in active TM that was transferred to Saxon, waiting on additional guidance from Legal on how to move forward with the conversion into ... modification. BX is about to be done and FC hold has been requested to ensure we are able to act on this loan. 3rd payment is in the mail, per [client].”[44]

         On September 29, 2009, a Saxon representative noted that “$2770.44 was sent over when file was acquired[.] There is one payment of $1739.70 included which is the TM payment. 3 by 3 was completed, one payment was returned.”[45] Another Saxon representative noted on September 29, 2009, that “there is enough money left in suspense for 3rd pmt to satisfy the 3 trial mod adv CJ3 of this. Cust will need to continue to make TM pmt while we complete spec project.”[46]

         On October 15, 2009, Saxon sent a letter to plaintiffs advising them that “Saxon is working to complete the Home Affordable Modification Program you began several months ago with Taylor, Bean....”[47] Saxon advised that it was “in the process of completing the necessary review of [the] loan” and that plaintiffs should “continue to make the agreed upon trial period payment until we notify you otherwise.”[48]

         On November 17, 2009, Lansburg sent a loan payment to Saxon in the form of a cashier's check.[49] Lansburg advised Saxon that she

wrote checks for September and October. Since we are going through bankruptcy, and you have not cashed our checks, I have withdrawn the money from our account. I did not want that amount of money sitting in our checking account while going through bankruptcy. I am afraid the bankruptcy court will take it. Before putting [the] September and October payment through, please contact me and I will replace those checks with a cashier's check.[50]

         Plaintiffs made another payment of $1740 in December 2009[51] and two payments of $1740 each in February 2010.[52]

         On January 27, 2010, a Saxon representative spoke with Lansburg about

missing HMP docs. Needed updated paystubs 4506-T and explanation of the profit on her 08 tax return. Sd that she was a real estate agent on the side but hasn't done anything in over 6 months. Also sd that they rec. a monthly check from the State because they take in foster children. Currently they have 5 children they are watching but are about to go back to 3 which is why the checks might be higher for now. She needs us to just hold the checks.[53]

         Lansburg faxed “the 4506T Form, current paystubs, W2 for 2009, and Letter of Explanation” to Saxon's Loan Modification department on February 8, 2010.[54]

         On February 11, 2010, the beneficial interest in plaintiffs' Deed of Trust was assigned to defendant Federal Home Loan Mortgage Corporation.[55] Saxon remained the servicer on plaintiffs' loan.

         On February 24, 2010, Saxon sent plaintiffs a letter requesting additional documents so it could complete its review of whether plaintiffs would qualify for a permanent HAMP agreement.[56] Plaintiffs were advised that they had until March 31, 2010 to submit the additional documentation.[57]

         On February 26, 2010, Saxon sent plaintiffs a letter advising that Saxon was “unable to provide you with a Home Affordable Modification Program agreement....”[58] Saxon indicated that plaintiffs were being denied a loan modification under HAMP because they “did not make all of the required Trial Period Plan payments by the end of the trial period.”[59]

         On March 3, 2010, Lansburg called Saxon “in response to [a] letter she received requesting missing documents that she faxed on 2/18/10[.]”[60] The Saxon representative noted that it “appears the mod may have been denied due to failure to make trial mod payments.”[61] The Saxon representative “sent email to TF3 and KM5 requesting a call back to [client] re: loan mod status.”[62] On March 5, 2010, TF3 noted that “removed in error, all payments made. Sent email. Request to unlock tricalc.”[63] And, on March 8, 2010, TF3 noted “Tricalc: Mod. Sent to UW.”[64]

         On March 5, 2010, Lansburg faxed additional financial documentation to Saxon's Loan Modification department.[65]

         On May 7, 2010, Lansburg called Saxon in response to a breach letter she had received.[66] A Saxon representative told Lansburg

that per our system she has been deemed not eligible for the HAMP modification. Advised I would look into and call back. Upon further research found that [client] was behind in pay- ments. She has claimed that she made all payments and that some payments had not cleared. She said she was going through bankruptcy and that she could not keep funds in her account as the trustee could liquidate it.[67]

         Lansburg noted that she was told that they “were pulled from H[A]MP program. Notes in system just say ‘No Recommendation.'”[68] Lansburg further noted that she was told that “once denied, can't get back into H[A]MP.”[69]

         On May 26, 2010, Lansburg emailed Chaunda Jackson, a Saxon employee, to

follow[] up on our loan. You were sending a request to extend foreclosure to 7/12 pending investigation for the H[A]MP program. We started the H[A]MP program with TB & W and it was transferred to Saxon last year when we made our 3[rd] and final trial payment. Saxon took us out of the H[A]MP program because they said we are behind on our payments and we are not.[70]

         Jackson forwarded the email to Dre Guilford because plaintiffs' loan was part of his managed portfolio.[71] Lansburg emailed Guilford again on June 14, 2010, after she discovered that the Property had been sold that afternoon at a trustee sale.[72]

         On June 14, 2010, the Federal Home Loan Mortgage Corporation bought the Property at the trustee sale for $240, 000.[73] At the time of the foreclosure sale, plaintiffs owed $482, 178.96.[74]

         On June 17, 2010, Lansburg requested that Saxon provide copies of the trial contract, copies of all payments made, and any documents showing that plaintiffs were notified of the June 14, 2010 trustee sale.[75] Plaintiffs received a packet of documents from Saxon but it contained “the information on a Saxon customer out of California.”[76] Lansburg avers that she “contacted Saxon in August 2010 advising them of their error and since that time, Saxon has not produced any [of the] documents I requested....”[77]

         Although the Property had already been foreclosed on, on September 3, 2010, Saxon sent plaintiffs a letter advising that they had been denied a permanent HAMP loan modification because they “did not make all of the required Trial Period Plan payments by the end of the trial period.”[78] The letter advised plaintiffs that they had 30 days in which to contact Saxon “to discuss the reason for non-approval for a HAMP modification or to discuss alternative loss mitigation options that may be available to you.”[79] The letter also advised that “you will not lose your home during this 30-day period....”[80] Lansburg avers that she and her husband “were not aware we were denied a loan modification until we receiv[ed]” this letter.[81]

         In September 2010, defendants gave plaintiffs written notice to vacate and in October 2010 filed a forcible detainer action in state court. Plaintiffs remained living in the Property during the state court proceedings and finally moved out of the Property in June 2013.

         Plaintiffs' only remaining claim is a claim for breach of contract. Plaintiffs allege that they had a “written TPP contract” with defendants and that defendants “breached the terms of the TPP by failing to comply with their duties which included either offering a loan modification on the 91st day after the TPP was executed or denying such modification.”[82]

         The parties' cross-motions on plaintiffs' breach of contract claim are now ready for disposition as is defendants' motion to strike certain factual assertions in plaintiffs' response to defendants' motion for summary judgment and the parties' requests for sanctions.[83]


         Summary judgment is appropriate when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). The initial burden is on the moving party to show that there is an absence of genuine issues of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). If the moving party meets its initial burden, then the non-moving party must set forth specific facts showing that there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). In deciding a motion for summary judgment, the court views the evidence of the non-movant in the light most favorable to that party, and all justifiable inferences are also to be drawn in its favor. Id. at 255. “[T]he court's ultimate inquiry is to determine whether the ‘specific facts' set forth by the nonmoving party, coupled with undisputed background or contextual facts, are such that a rational or reasonable jury might return a verdict in its favor based on that evidence.” T.W. Elec. Service, Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 631 (9th Cir. 1987).

         “In an action on a contract plaintiff has the burden of proof to show, 1) a contract, 2) a breach, and 3) damages.” Thunderbird Metallurgical, Inc. v. Arizona Testing Labs., 423 P.2d 124, 126 (Ariz.Ct.App. 1967)). In order to satisfy the Statute of Frauds, a contract “must state the terms and conditions of all the promises constituting the contract.” Broadway Realty & Trust, Inc. v. Gould, 665 P.2d 580, 581 (Ariz.Ct.App. 1983) (citation omitted). “For an enforceable contract to exist, there must be an offer, acceptance, and consideration.” Tabler v. Industrial Com'n of Ariz., 47 P.3d 1156, 1158 (Ariz.Ct.App. 2002).

         Defendants first argue that plaintiffs' breach of contract claim fails because no contract between defendants and plaintiffs existed. Defendants argue that the TPP itself was not a contract and that because a loan modification agreement was never executed, there was no contract to breach. Defendants argue that the TPP itself cannot be the contract that was allegedly breached because the Lender never signed the TPP.[84] The TPP expressly provides that “[t]his Plan will not take effect unless and until both I and the Lender sign it and the Lender provides me with a copy of this Plan with the Lender's signature.”[85] Moreover, defendants argue that it is undisputed that neither Taylor Bean nor Saxon ever agreed to change the date of the July and August payments from the first of the month to the eighth of the month. Thus, defendants argue that at best plaintiffs made a counter-offer, which Taylor Bean never accepted.

         However, as plaintiffs are quick to point out, in Corvello, the Ninth Circuit “held that ‘.. a TPP Agreement offered pursuant to HAMP is a contract, and a party to that contract may sue for breach if the lender violates a term contained within the four corners of the TPP.'” Meixner v. Wells Fargo Bank, N.A., 101 F.Supp.3d 938, 947 (E.D. Cal. 2015) (quoting Lazo v. Caliber Home Loans, Inc., No. 1:13-CV-2015 AWI JLT, 2015 WL 590663, at *5 (E.D. Cal. Feb. 12, 2015)). Under Corvello, a borrower has a valid claim for breach of the TPP agreement if the borrower has “fulfilled all of [his] obligations under the TPP, and the loan servicer has failed to offer a permanent modification[.]” Corvello, 728 F.3d at 884. If plaintiffs timely made all three TPP payments, then it was a breach of the parties' agreement for defendants not to “send a signed Modification Agreement offering to modify the loan....” Id. at 833.

         Plaintiffs were required to make three TPP payments prior to the Modification Effective Date, which was September 1, 2009. There is no dispute that plaintiffs made their first and second TPP payments prior to September 1, 2009.[86] As to whether plaintiffs made their third payment prior to September 1, 2009, the material facts are in dispute. There is evidence that suggests that plaintiffs did not make this payment until sometime in September 2009, such as Saxon's declaration that Saxon never received “[p]laintiffs['] third TPP payment from Taylor Bean”[87]and the September 4 servicing note in which the Saxon representative noted that Lansburg “said she just completed her 3rd pmt of her HAMP trial” and that “she is mailing her adjusted pmt today....”[88] There is also Lansburg's hand-written notes about the September 4, 2009 phone call which indicate that the Saxon representative “will notify the dept & let them know we made our 3rd & final trial pmt.”[89]

         But there is also evidence that suggests that plaintiffs' third payment was sent in August 2009, such as the fact that check number 1118 appears to have been dated August 8, 2009 and was made out to Sparta Special Servicing. While it is undisputed that check number 1118 did not clear plaintiffs' bank until September 14, 2009, that could have been a result of the change in servicer in August. Lansburg's bank statement for the period of August 11, 2009 through September 10, 2009 provides further evidence that check number 1118 was written in August 2009. That bank statement shows that check number 1117 cleared on August 19, 2009 and that check number 1119 cleared on August 31, 2009.[90] A logic inference to draw from this is that Lansburg issued check number 1118 in August and that processing of the check was delayed due to the change in servicer to Saxon.

         There is also the matter of Lansburg's declaration filed in connection with the cross-motions for summary judgment in which she avers that she issued the third payment (check number 1118) on August 8, 2009.[91] Defendants, however, move to strike this averment because they argue that it contradicts Lansburg's deposition testimony. The court may strike “‘sham' testimony upon making a finding of fact that” the testimony “‘flatly contradict[s] earlier testimony in an attempt to create an issue of fact and avoid summary judgment.'” Karpenski v. American General Life Companies, LLC, 999 F.Supp.2d 1218, 1224 (W.D. Wash. 2014) (quoting Kennedy v. Allied Mut. Ins. Co., 952 F.2d 262 (9th Cir. 1991)). Defendants argue that Lansburg's averment in paragraph 31 of her declaration that she “sent check 1118 in the amount of $1740.00 that I issued to my servicer on August 8, 2009"[92] directly contradicts her deposition testimony.

         At her October 8, 2012 deposition, Lansburg testified as follows:

Q. Then there's a notation here to Courtney Brown and a date, September 4, 2009. Do you see that?
A. I do.
Q. And then below that, can you read into [the] record what you wrote?
A. “Mail payment to this address. She will notify the department and let them know we made our third and final trial payment.”[93]

         At her April 12, 2017 deposition, Lansburg testified as follows when asked about a September 9, 2009, Saxon servicing note:

Q: It says, “Continued ... modification. Bankruptcy is about to be done and foreclosure hold has been requested to ensure we are able to act on this loan. Third payment in the mail, per CVI, ” which I'll represent is customer. Do you know if you called in about that time frame?
A: Possibly.
Q: And so that third payment would have been the one that you had issued about four days earlier. Does that sound right?
A. It sounds correct.
Q: So that check that cleared on the [14th], that probably would have been your third check, the third payment?
A. Correct.[94]

         Defendants argue that Lansburg testified twice that she sent the third TPP payment on or around September 5, 2009, and thus her averment that she sent it on August 8, 2009, directly contradicts this testimony.

         Similarly, defendants move to strike Lansburg's averment in paragraph 33 of her declaration that defendants sent the August 19, 2009 letter about the change in servicer from Sparta to Saxon, “approximately 11 days after I sent our final payment to Taylor Bean & Whitaker....”[95] Defendants argue that this averment contradicts ...

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