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Sayre v. Customers Bank

United States District Court, E.D. Pennsylvania

June 6, 2017

ROBERT D. SAYRE, Plaintiff,
v.
CUSTOMERS BANK, Defendant.

          OPINION

          Slomsky, J.

         I. INTRODUCTION AND BACKGROUND

         Plaintiff Robert D. Sayre was employed by ISN Bank (“ISN”), the predecessor of Defendant Customers Bank (“Customers”), as Vice President and Counsel from June 20, 2005 through March 31, 2010. (Sayre Tr., 37:20, 38:10-19, Sept. 19, 2016.) During his employment, Plaintiff received a home equity mortgage loan from ISN. (Exs. J-2, J-3.) While Plaintiff was making timely monthly payments on the mortgage, he was terminated as an employee and did not receive what he believed to be a previously negotiated severance package. (Sayre Tr., 48:11-14, Sept. 19, 2016.) As a result, Plaintiff felt that he had the right to set-off against his mortgage obligation the amount of the severance package that was owed to him.[1] Defendant refused to treat the transaction this way and the mortgage went into default for non-payment. (Id. at 48:23-25; 49:1-3.)

         Defendant then notified Plaintiff that the mortgage was in default and that if he did not make the mortgage current, foreclosure proceedings would be instituted against him and he would be liable for Defendant's attorney's fees.[2] (Ex. J-8.) The Notice provided that “[i]f the lender refers your case to its attorneys, but you cure the delinquency before the lender begins legal proceedings against you, you will still be required to pay the reasonable attorney's fees that were actually incurred, up to $50.” (Id. at 5.) Plaintiff brought the mortgage current, and legal proceedings were never instituted against him. (Sayre Tr., 51:24-25; 52:1-12, Sept. 19, 2016.) Later, after a period when he made timely monthly mortgage payments, he attempted to sell the property. At that time, in order to do so, Defendant charged him (1) $2, 934 in attorney's fees and (2) $535 in appraisal costs. Defendant was forced to pay these costs at closing when the property was sold. (Ex. J-11.)

         After protracted Motions practice in this case, the only remaining claim is set forth in Count II, which alleges a violation of the Pennsylvania's Unfair Trade Practices and Consumer Protection Law. The parties contest whether Plaintiff was deceived by the Notice he received after the Mortgage went into default. Plaintiff maintains that he believed only $50 in attorney's fees would be incurred because he paid the delinquency and thereafter made timely payments on the Mortgage. Defendant contends that there was no deception because the terms of the Note and the Mortgage allowed it to charge the fees after Plaintiffs' loan went into default.

         On September 20, 2016, a one-day bench trial was held before this Court. (Doc. No. 78.) Thereafter, Plaintiff and Defendant submitted proposed Findings of Fact and Conclusions of Law. (Doc. Nos. 79, 80.) Pursuant to Rule 52(a)(1) of the Federal Rules of Civil Procedure, the Court will now “find the facts specially and state its conclusions of law separately.” Fed.R.Civ.P. 52(a)(1).

         II. FINDINGS OF FACT

         A. The Parties

         1. Plaintiff, Robert D. Sayre is a fifty-five year-old attorney currently residing in Riverton, New Jersey. (Sayre Tr., 37:20, Sept. 19, 2016.) From June 20, 2005 to March 31, 2010, Plaintiff served as Vice President and Counsel of ISN Bank (“ISN”). (Id. at 38:10-19.)

         2. Defendant, Customers Bank (“Customers”) is the successor organization to ISN. (Doc. No. 22 at ¶ 2.) Customers is a Pennsylvania state chartered bank and a wholly-owned subsidiary of Customers Bancorp. Inc.[3] (Id.)

         B. The Procurement and Terms of the Mortgage

         3. On August 27, 2007, while employed with ISN, Plaintiff purchased a residential property located at 2219 Gaul Street, Philadelphia, Pennsylvania (the “Property”). (Sayre Tr., 40:5-10, Sept. 19, 2016.)

         4. On September 19, 2007, in connection with the purchase of the Property, Plaintiff obtained a home equity loan from ISN.

         5. He signed a promissory note (the “Note”). (Exs. J-2; J-3.) The Note was secured by a Mortgage (the “Mortgage”) placed on the Property.

         6. The Note and the Mortgage had definitions of when the loan was in default and when expenses by the lender could be collected from the borrower. (Ex. J-2 at 1.)

         7. The Note defined “default” as Plaintiff “fail[ing] to make any payment when due under this Note.” In relevant part, the Note provided:

Attorneys' Fees; Expenses. Lender may hire or pay someone else to help collect this Note if I do not pay. I will pay lender that amount. This includes, subject to any limits under applicable law, Lender's reasonable attorneys' fees and Lender's legal expenses, whether or not there is a lawsuit, including reasonable attorneys' fees, expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and any appeals. If not prohibited by applicable law, I will also pay court costs, in addition to all other sums provided.

(Ex. J-2 at 2.)

         8. Similarly, the Mortgage defined “default” as when the “[g]rantor fails to make any payment when due under the indebtedness.” (Ex. J-3 at 8.) Under the “Rights and Remedies on Default” section, the Mortgage provided:

Attorneys' Fees; Expenses. If Lender institutes any suit or action to enforce any of the terms of this Mortgage, Lender shall be entitled to recover such sum as the court may adjudge reasonable attorneys' fees at trial and upon appeal. Whether or not any court action is involved, and to the extent not prohibited by law, all reasonable expenses Lender incurs that in Lender's opinion are necessary at any time for the protection of its interest or the enforcement of its rights shall become a part of the Indebtedness payable on demand and shall bear interest at the Note rate from the date of the expenditure until repaid. Expenses covered by this paragraph include, without limitation, however subject to any limits under applicable law, Lender's reasonable attorneys' and Lender's legal expenses, whether or not there is a lawsuit, including reasonable attorneys' fees and expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services, the cost of searching records, obtaining title reports (including foreclosure reports), surveyors' reports, and appraisal fees and title insurance, to the extent permitted by applicable law. Grantor also will pay any court costs, in addition to all other sums provided by law.

(Ex. J-3 at 11.)

         9. Neither the Note nor the Mortgage has language stating that the default continues after a payment is missed and the Mortgage is brought current. (White Tr., 130:10-25, Sept. 19, 2016.)

         C. Plaintiff's Attempted Set-off and the Act 6/91 Notice

         10. On March 30, 2010, Plaintiff was terminated from his position at ISN without cause. (Sayre Tr., 48:11-14, Sept. 19, 2016.)

         11. After his termination, Plaintiff did not receive severance pay from ISN that had been previously negotiated. (Id. at 48:23-25.)

         12. Plaintiff then attempted to use funds from the severance package he expected to receive to set-off his mortgage payments. (Id. at 48:23-25; 49:1-3.)

         13. Plaintiff did not make any payments on the Note and the Mortgage from June 2010 to December 2011. (Id. at 48:23-25; 49:1-3.)

         14. In either May or June 2011, Defendant acquired Plaintiff's loan from ISN through the Federal Deposit Insurance Corporation. (Hansen Tr., 15:16-18, Sept. 19, 2016; White Tr., 109:16-17, Sept. 19, 2016.)

         15. On September 26, 2011, Phillip Berger, Esquire (“Berger”), outside counsel for Defendant, sent a letter to Plaintiff advising him that his Mortgage payments were delinquent and in default. (Ex. J-9.) Berger attached to the letter an “Act 6/91 Notice.” (Ex. J-8.) The letter stated the following:

Please be advised that we represent Customers Bank, successor to ISN Bank (“Customers Bank”) with regard to the above-captioned matter. You are indebted to Customers Bank pursuant to the terms of that certain promissory note dated September 19, 2007 in the principal sum of $98, 000 (“the Note”). You are in default of the Note by failing to pay amounts due and owing thereon.
As a result of your default you are obligated to make payment to Customers Bank of the sum of $80, 008.54 which is due and owing as follows:

Principal

$72, 419.95

Interest as of 9/26/11

$6, 553.64

Late Fees

$649.95

Appraisal Fee

$385.00

TOTAL DUE:

$80, 008.54

Interest continues to accrue on the Note at a rate of $13.37 per diem.
If the amount necessary to bring this loan current pursuant to the terms set forth in the attached Act 6/91 Notice is not paid within thirty (30) days of your receipt of this letter, Customers Bank will take all actions available at law to enforce its rights against you, which may include initiating a mortgage foreclosure action. Pursuant to the terms of the Note, if such actions are taken by Customers Bank, you will be responsible to Customers Bank for its legal expenses incurred to enforce its rights including costs of suit and attorney's fees. Your immediate attention to this matter is required.
If you have any questions, or would like to discuss this matter, please contact me or have your attorney contact me. As it [is] our hope that this matter can be worked out amicably, I look forward to your call.

(Ex. J-9 at 1-2.)

         16. The attached Act 6/91 Notice indicated that the current principal and interest owed was $13, 865.60, plus $649.95 in late fees, and $385 in appraisal fees.[4] (Id. at 4-5.) The total amount Plaintiff owed Defendant was $14, 900.55. It appears from the record that Plaintiff was first notified that he incurred late charges on an August 2010 invoice. (Ex. J-12 at 42.)

         17. The Act 6/91 Notice further provided:

IF THE MORTGAGE IS FORECLOSED UPON - The mortgaged property will be sold by the sheriff to pay off the mortgage debt. If the lender refers your case to its attorneys, but you cure the delinquency before the lender begins legal proceedings against you, you will still be required to pay the reasonable attorney's fees that were actually incurred, up to $50.00. However, if legal proceedings are started against you, you will have to pay all reasonable attorneys' fees actually incurred by the lender even if they exceed $50.00. Any attorney's fees will be added to the amount you owe the lender, which may also include other reasonable costs. If you cure the default within the THIRTY (30) Day period, you will not be required to pay attorney's fees.

(Ex. J-8 at 5.) (emphasis added.)

         18. The Act 6/91 Notice also gave Plaintiff the option of engaging in a consumer debt counseling program. (Id. at 8.) If Plaintiff participated in consumer credit counseling, Defendant was precluded from taking legal action against him for thirty days after the counseling session.[5]

         19. Kathleen Hansen (“Hansen”), an employee in Defendant's special assets group, was copied on Berger's letter and was aware that it had been sent to Plaintiff. (Hansen Tr., 19:5-23, Sept. 19, 2016; Ex. J-9 at 2.)

         20. On October 29, 2011, Sayre participated in a consumer counseling program with Acorn Housing Corporation (“Acorn”). (Sayre Tr., 51:24-25; 52; 52:1-12, Sept. 19, 2016; Ex. J-11.)

         21. After meeting with Plaintiff, Acorn notified Defendant of Plaintiff's participation in the counseling program. (Ex. J-11.)

         22. On December 12, 2011, Plaintiff brought the loan current by paying the total amount noted in Berger's September 26 letter. (Sayre Tr., 51:24-25; 52:1-12, Sept. 19, 2016.)

         23. Hansen testified that Defendant received payment of the outstanding balance on December 12, 2011, and that Defendant did not institute any legal proceedings against Plaintiff. (Id. at 56:12-25; Hansen Tr., 24:20-25; 25:1-7, Sept. 19, 2016.)

         24. Additionally, Robert White (“White”), an Executive Vice President of Defendant, testified that on December 12, 2011, Defendant applied Plaintiff's payment to the outstanding balance and the loan was no longer delinquent as of December 14, 2011. (White Tr., 104:23-25; 105:1-20, Sept. 19, 2016.)

         25. After bringing the loan current, Plaintiff made all subsequent payments timely. (Sayre Tr., 60:9-11, Sept. 19, 2016.)

         D. Berger's Invoices to Defendant for Legal ...


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