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Newton v. Beneficial Financial I, Inc.

United States District Court, W.D. Virginia, Charlottesville Division

February 16, 2018

Tonia Woodson Newton, ET AL., Plaintiffs,
Beneficial Financial I, Inc., ET AL., Defendants.



         This case is before the Court on motions for summary judgment, to compel discovery, and to amend the complaint.[1] It concerns the status of a mortgage and a home equity loan made to the Judith Woodson. Woodson purchased a home in Gordonsville, Virginia. She financed that purchase with a mortgage issued by a predecessor of Beneficial Financial I, Inc. (“Beneficial”). Roughly a year later, she received another loan from Beneficial based on her equity in that home. Beneficial sold that second loan to Ditech Financial, LLC (“Ditech”). However, Woodson eventually fell behind in making payments on these loans. Woodson passed away in 2015, and the three plaintiffs in this suit (“the heirs”) inherited the home. Because of delinquencies on the loans, Beneficial moved to foreclose. The heirs filed this suit to stop the foreclosure proceedings. During the pendency of the suit, Carrington Mortgages Services, LLC (“Carrington”), who is not a party to this suit, purchased the first mortgage from Beneficial.

         The heirs, in an action for quiet title, asked the Court to determine whether Beneficial discharged the home equity loan (Count One). Because they alleged that this loan had been discharged, the heirs also argued Beneficial and Ditech wrongly refused to remove a related lien on the property (Counts Two and Three). This failure to remove the lien allegedly prevented the heirs from selling the property and discharging the first loan, the mortgage. And so the heirs asked for a declaratory judgment preventing foreclosure and the imposition of related costs (Counts Four and Five). The heirs finally asked the Court for a declaratory judgment about the outstanding balance on the first loan (Count Six).

         Beneficial and Ditech moved for summary judgment on these claims. I grant summary judgment on the claims relating to the home equity loan because no reasonable jury could find that Beneficial or Ditech ever cancelled that loan. I dismiss the claims relating to the mortgage without prejudice because Beneficial has sold the mortgage, and so the requests for declaratory judgments against it are moot. Finally, I deny the motion to compel because the heirs did not conform with Judge Conrad's scheduling orders. I deny the motion to amend because amendment at this stage would prejudice these defendants.

         I. Motion to Compel Discovery

         The heirs' motion to compel, (dkt. 59), was automatically denied by operation of Judge Conrad's scheduling order. The motion, filed on September 20, 2017, claimed that Beneficial did not sufficiently respond to the heirs' requests for Beneficial's files on the two loans. (Id. at ECF 2-5). According to Judge Conrad's scheduling orders, the heirs were required to schedule a hearing or advise the Court that the motion was ripe for decision within 45 days of filing that motion. (Dkt. 52 at ECF 3; see also dkt. 62 at ECF 3). The parties continued with discovery, with the heirs' taking the defendants' depositions and the defendants turning over more documents. (Dkts. 60, 61, 90). Discovery concluded on October 18, 2017, (dkt. 62 at ECF 1), and the Court did not hear any more about this dispute until the heirs' opposition to summary judgment, (dkt. 77 at ECF 3). The heirs never scheduled a hearing or advised the Court that the motion was ripe for decision. Per the language of Judge Conrad's scheduling orders, this motion was automatically denied by virtue of the passing of time. See dkt. 62 at ECF 3 (“[T]he motion will be deemed denied without further notice or order of this court . . . .”); see also Local Rule 11(b) (“Unless otherwise ordered, a motion is deemed withdrawn if the movant does not set it for hearing (or arrange to submit it without a hearing) within 60 days after the date on which the motion is filed.”). Holding otherwise would prejudice the defendants, who briefed summary judgment on the belief that the dispute was resolved, (dkt. 90), and would potentially delay the resolution of this case by requiring the reopening of discovery. Whether all of the appropriate documents were produced was a matter that the heirs needed to bring up within the deadlines set by Judge Conrad. The Court will not reopen discovery now; the motion is denied.[2]

         II. Summary Judgment

         A. Standard of Review

         I now move on to the defendants' motions for summary judgment. Federal Rule of Civil Procedure 56(a) provides that a court shall grant summary judgment “if the movant shows that there is no genuine dispute as to any material fact.” “As to materiality . . . [o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In order to preclude summary judgment, the dispute about a material fact must be “genuine.” Id. A dispute is “genuine” if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id. But “[t]he responsibility to comb through the record in search of facts relevant to summary judgment falls on the parties-not the court.” Carlson v. Boston Sci. Corp., 856 F.3d 320, 325 (4th Cir. 2017). I must view the cited materials as a whole and draw all reasonable inferences in the light most favorable to the nonmoving party. See, e.g., Celotex Corp. v. Catrett, 477 U.S. 317, 322-24 (1986).

         B. Undisputed facts

         Judith Woodson purchased a home in Gordonsville, Virginia in January 2005. To finance the purchase, she received a mortgage for $117, 304.54 from Beneficial Mortgage Company. (Dkt. 69-1 at ECF 4; dkt. 69-2 at ECF 2; dkt. 69-3 at ECF 2). This loan was secured by the property. (Dkt. 69-3 at ECF 2). As part of the mortgage, Woodson promised to make monthly repayments on the loan. (Dkt. 69-2 at ECF 3). A little over a year later, in March 2006, Woodson received a second loan from Beneficial for $31, 200.00. (Dkt. 69-4; dkt. 69-5 at ECF 2). This loan was also secured by Woodson's property, and Woodson again promised to make repayments. (Dkt. 69-4; dkt. 69-5 at ECF 2).

         The loan payment histories and statements demonstrate Woodson was frequently behind on both loans. (Dkt. 69-10 at ECF 5; dkt. 84-1 at ECF 2-26 (demonstrating irregular payments and late charges throughout the lives of the loans)). Beneficial's statement to Woodson indicated that the mortgage had an amount past due of $3, 578.30 at the end of 2011. (Dkt. 84-1 at ECF 284). The home equity loan was also behind at that time. (Id. at ECF 474). Internally, Beneficial marked the home equity loan as “charged off.” This designation meant that Beneficial felt repayment was unlikely, although Beneficial did not indicate that Woodson had repaid the loan or that Beneficial would stop trying to recover the remaining balance. (Dkt. 69-6 at ECF 4).

         Beneficial sent a Form 1099-C to Woodson concerning fiscal year 2012. (Dkt. 69-6 at ECF 3; dkt. 69-7; dkt. 69-8 at ECF 3). A Form 1099-C is an IRS form that creditors must file with debtors when they discharge indebtedness. 26 C.F.R. § 1.6050P-1(a). This form indicated that $30, 749.87 of Woodson's mortgage debt had been discharged. (Dkt. 69-7). However, Beneficial believed that it had sent this form in mistake, and so it issued a corrected Form 1099-C that indicated that no mortgage debt had been discharged. (Dkt. 69-9; dkt. 69-6 at ECF 3).

         In 2013, the parties talked about settling the outstanding second loan. Beneficial sent settlement offers to Woodson regarding this loan after it had been charged off. (Dkt. 69-6 at ECF 5). Woodson agreed to a settlement plan and made some payments on it. (Id.). In April 2013, Woodson advised Beneficial that she would not be able to make the final payments on the settlement plan because she had lost her job. (Dkt. 84-1 at ECF 614; dkt. 69-6 at ECF 5). Woodson's daughter stated that she had a separate call with Beneficial during April 2013 and that a Beneficial representative told her that “no payments needed to be made” on the second loan. (Dkt. 77-2 at ECF 6-7). Woodson's daughter also stated that she overheard a similar conversation when her mother was on a phone call with Beneficial in February 2014. (Dkt. 77-3 at ECF 1-2). The settlement plan was never completed. Approximately a year later, in May 2014, Beneficial sold the home equity loan to Ditech's predecessor. (Dkt. 84-1 at ECF 613; dkt. 69-8 at ECF 4; dkt. 69-12; dkt. 71-1 at ECF 2).

         In March 2014, Beneficial and Woodson did negotiate an adjustment to the underlying mortgage, the first loan. (Dkt. 77-3 at ECF 2-3, 7-13). This agreement reduced the principal of that loan. (Id. at ECF 16). But even with this adjustment, Woodson fell behind again and asked Beneficial to engage in a short sale. (Id. at ECF 50; dkt. 84-1 at ECF 6). Beneficial declined to engage in a short sale because it believed there was still equity in the home. (Dkt. 77-2 at ECF 8).

         Woodson died intestate in March 2015. (Dkt. 69-10 at ECF 4). After Woodson's death, the plaintiffs inherited the property. (Dkt. 69-10 at ECF 5). Woodson's heirs sought to have the liens on the property released by Beneficial and were referred to the lien release department. (Dkt. 77-3 at ECF 3). Beneficial moved to foreclose on the property in August 2016, but was enjoined by the Louisa County Circuit Court. (Dkt. 7 at ECF 157). The case was then removed to this Court. (Dkt. 1). In September 2017, while this case was pending, Beneficial sold the first loan to Carrington Mortgage Services, LLC. (Dkt. 71-1 at ECF 4).

         C. ...

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