955 F. Supp. 2d 640
S.D. Miss.2013Background
- Terry and Nawasa Montgomery borrowed $264,009.93 secured by a deed of trust on their Mississippi home; monthly note payment was $2,323.27.
- Citicorp assigned servicing to CitiMortgage in July 2008. The Montgomeries sought interest-rate reduction/assistance in 2008–2009 and entered a HAMP trial period plan (TPP) effective Oct. 1, 2009 requiring reduced monthly TPP payments.
- Plaintiffs allege they timely made reduced payments during the modification process (approx. $26k–$28k) but CitiMortgage failed to apply them, later reported the loan delinquent, and referred the loan to foreclosure in Oct. 2010; foreclosure has not been finalized.
- CitiMortgage contends Plaintiffs failed to submit necessary documentation for permanent HAMP modification and that Plaintiffs became delinquent and have not made payments since Aug. 30, 2010.
- Procedural posture: Plaintiffs sued in state court asserting seven counts (negligence; intentional/negligent emotional distress; breach of fiduciary duty; unjust enrichment; breach of implied covenant; failure to train/monitor; injunction). CitiMortgage removed to federal court and moved to strike certain exhibits and for summary judgment.
- Court granted defendant’s Motion to Strike (unopposed) and granted summary judgment in part: dismissed Counts II (intentional infliction), III (fiduciary duty), IV (unjust enrichment), V (breach of implied covenant), and VI (failure to train/monitor); denied summary judgment on Count I (negligence) and Count VII (injunctive relief) remains pending.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Duty for negligence claims | CitiMortgage, as servicer, owed duties to apply payments and process modification fairly; contractual relationship creates duty | No legal duty existed between mortgagee/servicer and borrowers beyond arms-length transaction | Court: duty existed (contract/deed of trust and servicing relationship impose duty); summary judgment on lack of duty denied |
| Evidence of breach/causation/damages (negligence) | Plaintiffs testified they timely paid and were repeatedly told to provide docs; payments were not applied; they suffered lost wages, credit harm | CitiMortgage submitted business records and affidavit that plaintiffs failed to submit required documents and lacked evidence of damages | Court: genuine issues of material fact exist as to mishandling of payments, breach, and damages; negligence claim survives summary judgment |
| Emotional distress (intentional & negligent) | Plaintiffs claim stress, sleep loss, hospitalization, and medical issues tied to CitiMortgage conduct | CitiMortgage argues conduct was not extreme/outrageous and Plaintiffs lack medical proof tying injuries to conduct | Court: intentional infliction dismissed (conduct not extreme). Mr. Montgomery’s negligent distress dismissed (insufficient medical proof). Mrs. Montgomery’s negligent distress dismissed for lack of medical records/testimony to establish causation |
| Fiduciary duty & unjust enrichment & breach of implied covenant | Plaintiffs argue servicer accepted federal funds/HAMP and thus owed heightened duties; claim unjust retention of money and bad-faith performance | CitiMortgage: arms-length mortgagor-mortgagee relationship; contractual remedies govern; no fiduciary relationship; unjust enrichment inapplicable where contract exists; alleged conduct at most negligent | Court: fiduciary duty claim dismissed (no fiduciary relationship as a matter of law); unjust enrichment dismissed (contract governs); breach of implied covenant dismissed (no conscious bad faith shown) |
Key Cases Cited
- Cuadra v. Houston Indep. Sch. Dist., 626 F.3d 808 (5th Cir. 2010) (summary judgment standards when nonmovant bears burden)
- Sierra Club, Inc. v. Sandy Creek Energy Assocs., L.P., 627 F.3d 134 (5th Cir. 2010) (materiality and genuine dispute definitions for summary judgment)
- Deville v. Marcantel, 567 F.3d 156 (5th Cir. 2009) (court may not weigh credibility on summary judgment)
- Celotex Corp. v. Catrett, 477 U.S. 317 (U.S. 1986) (summary judgment burden-shifting principles)
- River Prod. Co. v. Baker Hughes Prod. Tools, Inc., 98 F.3d 857 (5th Cir. 1996) (duties may arise from undertakings apart from contract)
- American Nat. Bank of Iuka v. Mitchell, 359 So.2d 1376 (Miss. 1978) (mortgagee–mortgagor relationship and duty of fairness)
- Kennedy v. Ill. Cent. R. Co., 30 So.3d 333 (Miss. 2010) (damages must be shown with reasonable certainty; extent for jury)
- Wilson v. Gen. Motors Acceptance Corp., 883 So.2d 56 (Miss. 2004) (standards for emotional distress recovery under negligence)
- Hopewell Enters., Inc. v. Trustmark Nat’l Bank, 680 So.2d 812 (Miss. 1996) (mortgagor–mortgagee relationship not ordinarily fiduciary)