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Option One Mortgage Corp. v. Fitzgerald

October 15, 2009

OPTION ONE MORTGAGE CORPORATION, PLAINTIFF,
v.
KEVIN FITZGERALD, JACQUELINE FITZGERALD, NBT BANK, N.A., AND JP MORGAN CHASE BANK, N.A., DEFENDANTS.



The opinion of the court was delivered by: Judge Caputo

MEMORANDUM

Presently before the Court are Defendants' Motion for Summary Judgment (Doc. 102) and Plaintiff's Motion for Summary Judgment (Doc. 104). For the reasons outlined below, Plaintiff's Motion for Summary Judgment will be granted and Defendants' Motion for Summary Judgment will be denied. The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1332.

BACKGROUND

Defendants Kevin and Jacqueline Fitzgerald ("the Fitzgeralds") purchased real property located at 424 Tomahawk Road, Paupack, Pennsylvania, and executed and delivered a mortgage securing a Note to New York Mortgage Company, who then transferred its interest in the mortgage to Plaintiff Option One Mortgage Corporation ("Option One"). (Doc. 102, Ex. D; Doc. 115, Attach. 1, Ex. I.) In accordance with the terms of the loan obligation, the Fitzgeralds had a hazard insurance policy for damage to their home and property on which Plaintiff was an additional beneficiary. (Doc 102, Ex. D; Doc. 115, Attach. 1, Ex. L.) The premises sustained fire damage on or about January 11, 2006, and thereafter, a loss draft check (Check No. 58320036, dated May 23, 2006) in the amount of One Hundred Thirteen Thousand, Six Hundred Thirteen Dollars ($113,613.00), made payable to "Kevin Fitzgerald and Jacqueline Fitzgerald and Option One Mrtg Corp" was issued by Nationwide Insurance. (Doc. 102, Ex. B, Senor Dep. 11:22-11:23, Jan. 9, 2009; Doc. 104, Attach. 2.) According to the terms of the mortgage agreement and Option One's business policy, the Fitzgeralds were to indorse the check and forward it to Plaintiff for its endorsement, after which Plaintiff would deposit the check into a trust account, disburse the funds as appropriate to monitor repairs, or keep the check and apply it to the remaining debt on the loan. (Doc. 102, Ex. D; Doc. 102, Ex. A, Clary Dep. 91:20-92:12, Feb. 19, 2009.)

On June 26, 2006, the Fitzgeralds deposited the check, which had been indorsed by the Fitzgeralds only, with Defendant NBT Bank. (Doc. 104, Attach. 2.; Doc. 92., Ex. B, Kevin Fitzgerald Dep. 24:23-25:23, Jan. 9, 2009; Doc. 115, Attach. 3, Jacqueline Fitzgerald Dep., 9:9-10:5, Jan. 9, 2009.) Plaintiff alleges that although, as a named payee, it was a necessary signor, Defendants NBT Bank and JP Morgan Chase Bank, N.A. ("JP Morgan") both honored the check without Plaintiff's endorsement, paying its entire proceeds to the Fitzgeralds without Plaintiff's knowledge, consent, or authority. (Id. ¶¶ 20-22, 46, 66.) Plaintiff alleges that as a result of this action and the damage to the Premises, Plaintiff has no security in the loan obligation. (Id. ¶¶ 22-23.) Plaintiff alleges that NBT Bank has failed and/or refused to remit the amount of the check to Plaintiff.

In June 2007, Option One assigned its rights in the Fitzgeralds' mortgage to Wells Fargo Bank ("Wells Fargo"). (Doc. 102, Ex. F.) Some time in 2008, Option One sold most of its assets, including its servicing platform to American Home Mortgage Servicing, Inc. ("American Home"). (Clary Dep. 5:25-8:5; Doc. 115, Attach. 2.) On November 21, 2008, Wells Fargo executed a Limited Power of Attorney giving American Home the power to "take any and all appropriate action" to service loans in the name of Wells Fargo. (Doc. 115, Attach. 1, Ex. U.)

On April 27, 2007, Wells Fargo filed a foreclosure action on the Fitzgeralds' property in the Wayne County Court of Common Pleas. (Doc. 102, Ex. G.) Wells Fargo was the winning bidder at the Sheriff's Sale, buying the property for Two Thousand, Seven Hundred Forty-Eight Dollars and Seventy Cents ($2,748.70). Wells Fargo did not file a petition to establish the property's fair market value, as required by the Pennsylvania Deficiency Judgment Act, and the Fitzgeralds filed a petition to have their debt marked as fully satisfied. (Doc. 102, Ex. I.) On July 9, 2009, the debt was marked as satisfied in full by court order of the Wayne County Court of Common Pleas. (Doc. 102, Ex. J.)

Plaintiff's original complaint alleged claims of Conversion (Count I) and Fraud (Count II) against the Fitzgeralds, and claims of Conversion under 13 PA. CONS. STAT. ANN. § 3420 against NBT Bank (Count III) and JP Morgan (Count IV). (Doc. 1.) Defendant NBT Bank filed a Motion to Dismiss, which this Court denied on June 9, 2008. (Docs. 5, 20.) Plaintiff filed its Amended Complaint on November 3, 2008, adding a Breach of Contract against the Fitzgeralds (Count V). On February 5, 2009, this Court entered a Default Judgment against the Fitzgeralds for One Hundred Thirteen Thousand, Six Hundred One Dollars ($113,601.00) for failing to answer the amended complaint. (Doc. 94.) Plaintiff and Defendants both filed Motions for Summary Judgment on July 27, 2009. (Doc. 102, 104.) All current motions have been fully briefed and are now ripe for disposition.

LEGAL STANDARD

Summary judgment is appropriate if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c). A fact is material if proof of its existence or nonexistence might affect the outcome of the suit under the applicable substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

Where there is no material fact in dispute, the moving party need only establish that it is entitled to judgment as a matter of law. Where, however, there is a disputed issue of material fact, summary judgment is appropriate only if the factual dispute is not a genuine one. Id. An issue of material fact is genuine if "a reasonable jury could return a verdict for the nonmoving party." Id.

Where there is a material fact in dispute, the moving party has the initial burden of proving that: (1) there is no genuine issue of material fact; and (2) the moving party is entitled to judgment as a matter of law. See CHARLES ALAN WRIGHT & ARTHURR. MILLER, FEDERAL PRACTICE AND PROCEDURE: CIVIL 2D § 2727 (2d ed. 1983). The moving party may present its own evidence or, where the nonmoving party has the burden of proof, simply point out to the Court that "the nonmoving party has failed to make a sufficient showing of an essential element of her case." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

All doubts as to the existence of a genuine issue of material fact must be resolved against the moving party, and the entire record must be examined in the light most favorable to the nonmoving party. White v. Westinghouse Elec. Co., 862 F.2d 56, 59 (3d Cir. 1988).

Once the moving party has satisfied its initial burden, the burden shifts to the nonmoving party to either present affirmative evidence supporting its version of the material facts or to refute the moving party's contention that the facts entitle it to judgment as a matter of law. Anderson, 477 U.S. at 256-57.

The Court need not accept mere conclusory allegations, whether they are made in the complaint or a sworn statement. Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 888 (1990). In deciding a motion for summary judgment, "the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson, 477 U.S. at 249.

DISCUSSION

I. DEFENDANTS' ...


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