Blackston v. Seterus, Inc. (In re Blackston)
557 B.R. 858
Bankr. D. Md.2016Background
- In 2006 Blackston took a mortgage from Bank of America (BANA) with an agreed escrow-waiver for taxes/insurance; deed of trust allowed revocation by notice and the waiver agreement listed triggers for revocation.
- In July 2012 Blackston asked BANA for mortgage relief; NACA submitted a loan-modification package including the final page of Form 710, whose paragraph 10 states any prior escrow waiver is revoked; BANA treated receipt of that page as a revocation and paid real estate taxes in August 2012.
- BANA denied an escrow-removal request in November 2012 and offered a modification requiring escrow; Blackston declined the modification and continued paying only principal & interest, not the escrow portion.
- Servicing transferred to Seterus on December 1, 2012; Seterus sent notices of underpayment and delinquency because escrow was not paid and later received from Blackston (Feb 14, 2013) an executed Form 710 acknowledging revocation of any prior escrow waiver.
- Blackston sued BANA (negligence) and Seterus (breach of contract, MCPA, MFPA, negligence, defamation), claiming the escrow waiver revocation was improper and led to wrongful default/foreclosure efforts; cross-motions for summary judgment followed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether BANA owed a tort duty to Blackston for allegedly failing to notify of escrow-waiver revocation (negligence) | BANA breached a duty by not communicating revocation, preventing remediation before transfer | No special circumstances created a tort duty; dispute is contractual and governed by loan documents; HAMP process does not create a tort duty | Court: No tort duty; negligence claim against BANA dismissed |
| Whether Seterus breached contract by revoking/acting on escrow-waiver | Seterus improperly revoked waiver and asserted default | Seterus was not party to original loan/waiver and cannot be liable for breach of those contracts; it serviced per loan status | Court: Seterus not a contracting party; breach claim fails |
| Whether Seterus violated MCPA or MFPA by servicing/reporting delinquency | Seterus engaged in unfair/deceptive practices and/or mortgage fraud by treating waiver as revoked and reporting delinquency | Seterus relied on loan transfer records and executed Form 710; no evidence of deception, intent to defraud, or reliance by Blackston | Court: No viable MCPA or MFPA claim; summary judgment for Seterus |
| Whether Seterus’s reporting/communications support negligence or defamation claims | Reporting delinquency and notices were false/malicious, causing damages | After Feb 14, 2013 Blackston executed Form 710 revoking waiver; reporting was accurate; no evidence of malice or reckless disregard during earlier period | Court: Negligence claim fails (no tort duty); defamation preempted by FCRA absent malice — no malice shown; summary judgment for Seterus |
Key Cases Cited
- Jacques v. First Nat’l Bank of Md., 515 A.2d 756 (Md. 1986) (contract breach alone does not create tort duty absent independent legal duty)
- Parker v. Columbia Bank, 604 A.2d 521 (Md. Ct. Spec. App. 1992) (special circumstances required to impose fiduciary/tort duties on lender)
- Legore v. OneWest Bank, FSB, 898 F. Supp. 2d 912 (D. Md. 2012) (HAMP modification process does not create special circumstances to form a tort duty)
- Goodman v. Resolution Trust Corp., 7 F.3d 1123 (4th Cir. 1993) (summary judgment standards for contract interpretation and ambiguity)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (U.S. 1986) (standard for summary judgment and assessing genuine issues of material fact)