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Higgins v. First Horizon National Corp.

United States District Court, D. Montana, Great Falls Division

March 8, 2018




         The Court heard this matter, sitting without a jury, on March 8, 2017, in Great Falls, Montana. Helge Naber represented Plaintiff Patrick Higgins (“Higgins”). Michelle Sullivan and Adrian Miller represented Defendants First Horizon National Corporation, Nationstar Mortgage Holding Inc., and Metlife Home Loans LLC (collectively “Defendants”). The Court twice ordered the parties to participate in settlement conferences after the trial. Both efforts failed to resolve the dispute.

         Having heard the evidence and reviewed the trial briefs of both parties, the Court makes the following:


         1. The events leading to this action took place primarily in Cascade County, Montana.

         2. Higgins brought claims against Defendants on April 21, 2014, in the Eighth Judicial District Court, Cascade County, Montana.

         3. Defendants removed the action to this Court on November 13, 2015.

         4. Higgins alleged various violations of Montana's Consumer Protection Act, § 30-14-101, et seq., several breaches of the covenant of good faith and fair dealing, and unjust enrichment.

         5. Higgins contends that Defendants improperly handled a forbearance agreement that he entered with First Horizon Home Loans in 2009. Higgins alleges in his Complaint, in part, that Defendants provided the wrong payment address related to a forbearance agreement that the parties attempted to enter in 2009.

         6. Higgins alleges that Defendants violated the covenant of good faith and fair dealing when Defendants failed to credit properly payments that Higgins attempted to tender to First Horizon Home Loans under the forbearance agreement. Higgins further alleges that First Horizon Home Loans failed to comply with its obligations under the forbearance agreement.

         7. Higgins alleges that Defendants violated the Montana Consumer Protection Act relating to conduct surrounding a foreclosure sale that Defendants threatened in 2012. Defendants had sent Higgins a notice of a foreclosure sale scheduled for March 26, 2012. Higgins attempted to stave off the foreclosure sale through a loan modification. Higgins contends that Defendants refused to cancel the foreclosure sale as required by the loan modification program once he had filed a completed application with the accompanying financial information on March 14, 2016. Higgins contends that Defendants instead continued to threaten to proceed with the foreclosure sale unless Higgins reinstated his loan obligations. Higgins argues that these improper actions by Defendants wrongly coerced him into mailing a payment of $187, 823.13, on March 16, 2012.

         8. Higgins's unjust enrichment claim arises from these same two events.

         9. Defendants denied all of the allegations in Higgins's complaint. Defendants asserted an affirmative defense under the statute of limitations with respect to the Montana Consumer Protection Act claims.

         10. Defendants also claimed that Higgins had named as defendants several parties who played no role in these events. Defendants filed a motion before trial to dismiss a number of these parties. The Court took the matter under advisement.

         11. The parties presented evidence at trial related to the two central disputes of the bungled forbearance agreement in 2009 and the run-up to the foreclosure sale scheduled for March 26, 2012.

         Events in 2006

         12. Higgins purchased 870 acres of property in Cascade County. Higgins recorded a Warranty Deed dated October 17, 2006, as Document No. R0138008 in the records of the Cascade County Clerk & Recorder. Higgins took out a loan from Rocky Mountain Bank to finance the purchase.

         13. Higgins signed a loan application to secure financing from First Horizon Home Loan Corporation for a house and 20 acres of the 870-acre parcel on November 13, 2006. The Rocky Mountain Bank loan would secure the remaining 850 acres of Higgins's 870 total acres.

         14. Higgins executed a promissory note in favor of First Horizon Home Loan Corporation in the principal amount of $395, 000.00 on November 13, 2006. The promissory note required monthly payments of principal and interest of $2, 761.90 over a 30-year period. The promissory note also required Higgins to make payments each month to an escrow account to cover taxes, insurance, and mortgage insurance. The escrow payment brought Higgins's total monthly payments for the promissory note to $4, 041.16.

         15. Higgins also executed a deed of trust to secure repayment of the promissory note on November 13, 2006. The deed of trust encumbers a 20-acre parcel of land that includes a house and out buildings. The 20-acre parcel and the out buildings formerly had been attached to the 870 acres transferred by the Warranty Deed dated October 17, 2006.

         16. The resulting 20-acre parcel is identified as follows:

A tract of land in the E1/2E1/2 of Section 21 and the W1/2W1/2 of Section 22, Township 19 North, Range 2 West, M.P.M., Cascade County, Montana, described as follows:
Commencing at the N1/4 of Section 20, Township 19 North, Range 2 West, M.P.M., which is a found stone as described in the original GLO notes; thence N89˚50'55”E, along the record North line of Section 20 and 21 a distance of 7958.61 feet to the Northeast Corner of Section 21; thence S00˚24'42”E, a distance of 2640.04 feet along the record East line of Section 21 to the E1/4 of said Section 21; thence S00˚24'42”E along said East line a distance of 675.39 feet to a point on said East line of Section 21, that point being the point of beginning of the parcel herein described;
Thence along the North right-of-way of a county roadway N68˚35'57”W, a distance of 296.99 feet to the P.C. of a curve; thence along a circular curve, concave south with a central angle of 15˚18'12”, a radius of 712.00 feet, an arc distance of 190.17 feet; thence N35˚25'21”E, a distance of 777.69 feet; thence N90˚00'00”E, a distance of 899.60 feet; thence S00˚00'00”E, a distance of 785.72 feet; thence S89˚48'44”W, a distance of 854.35 feet to the point of beginning. According to Certificate of Survey No. S-0004426M.

         The above-described parcel is hereafter referred to as the “Property”.

         17. Higgins recorded the deed of trust identified above (hereafter referred to as the “Deed of Trust”) as Document No. R0138012 in the records of the Cascade County Clerk & Recorder on November 15, 2006. The Court will refer to the Deed of Trust and the promissory note hereafter collectively as the “Loan.”

         18. Similar to many mortgages issued during this period, First Horizon Home Loan Corporation sold the loan on the secondary market to Federal National Mortgage Association (“Fannie Mae”) at some point shortly after the loan originated. This sale introduced many new parties to this saga, including lenders, loan servicing companies, and various subsidiaries of these companies. These other parties include the following: First Horizon Home Loan Corp., First Tennessee Bank National Association, Metlife Home Loans, Nationstar Mortgage Holdings, Inc., and Nationstar Mortgage LLC.

         19. Fannie Mae constitutes a government sponsored enterprise (“GSE”). The Fannie Mae Single Family 2012 Servicing Guide governed the servicing of Higgins's Loan in 2012.

         20. Higgins's loan with Rocky Mountain Bank to finance the original purchase of the 870-acre parcel had closed before Higgins received the loan from First Horizon Home Loan Corporation. Higgins did not disclose the monthly loan payment owed to Rocky Mountain Bank on his application for the loan from First Horizon Home Loan Corporation.

         21. Defendants presented evidence at trial regarding Higgins's apparent failure to disclose his financial obligations under the loan with Rocky Mountain Bank at the time that he closed on the Loan at issue. Defendants presented this evidence in an attempt to demonstrate that Higgins's alleged omission constituted a breach under the terms of the Loan that would have disqualified him for the Loan, as well as any programs to modify the terms of the Loan under a variety of programs that emerged during the time period in question.

         22. The Deed of Trust includes the following language at Section 8 of that document:

Borrower shall be in default if, during the Loan application process, Borrower or any persons or entities acting at the direction of Borrower or with Borrower's knowledge or consent gave materially false, misleading, or inaccurate information or statements to Lender (or failed to provide Lender with material information) in connection with the Loan.

         23. The Court finds no need to resolve the question of whether Higgins failed to disclose the existence of the Rocky Mountain Bank loan at the time that he obtained the Loan at issue and whether this omission constituted a material breach of the terms of the Loan. The record indicates that Defendants took no steps to foreclose on Higgins's Loan based upon the alleged omission. The record further indicates that Defendants' refusal to modify Higgins's Loan, either through the forbearance agreement or any other programs, related in no way to their discovery of Higgins's alleged omission. The evidenced developed at trial instead shows that Defendants possessed no knowledge of Higgins's alleged omission until preparing for trial in this matter in late 2016 and early 2017.

         Events in 2007

         24. Higgins paid on the Loan as promised for the remainder of 2007.

         Events in 2008

         25. Higgins fell a payment or two behind on his Loan by May 2008.

         26. First Horizon Home Loans and Higgins communicated regarding the Loan in 2008. First Horizon Home Loans initiated foreclosure proceedings on the Property in November 2008.

         27. Higgins sent a cashier's check payable to Metlife Home Loans LLC in the amount of $26, 066.56, on or about December 22, 2008. Metlife Home Loans LLC subserviced Higgins's loan on behalf of First Horizon Home Loans at that time.

         28. Higgins's $26, 066.56 payment fully reinstated his loan and successfully avoided a foreclosure sale of the Property. Higgins's payments on the Loan remained current at the end of 2008.

         Events in 2009

         29. Higgins fell two months behind on his loan payments by February 2009.

         30. First Horizon Home Loans sent a letter to Higgins dated June 19, 2009. The letter informed Higgins that he had been denied a modification pursuant to the Home Affordable Modification Program. (Doc. 78-8.)

         31. First Horizon Home Loans informed Higgins in the same letter, however, that he could participate in the HomeSaver Forbearance program. The letter explained that Higgins would be required to make reduced monthly payments for up to six months. First Horizon Home Loans further informed Higgins that it would “work with” him “to find a long-term solution that allows you to avoid foreclosure.” Id.

         32. First Horizon Home Loans directed Higgins to notify it by July 3, 2009, whether he agreed to participate in the forbearance program. The letter directed Higgins to sign and return “the enclosed Forbearance Agreement no later than 07/03/2009.” Id.

         33. The letter further directed Higgins to include with the signed Forbearance Agreement “his first monthly payment as established by the Forbearance Agreement.” Id. The attached Forbearance Agreement identified the first of six equal payments of $2, 275.57, to be paid by July 19, 2009. (Doc. 78-9)

         34. Higgins testified that he never received the Forbearance Agreement until September 10, 2009. The record contains no definitive evidence as to the date that Higgins received the Forbearance Agreement.

         35. All parties agree that Higgins signed the HomeSaver Payment Forbearance Agreement (“Forbearance Agreement”) on September 11, 2009. (Doc. 78-9.) Higgins returned the executed Forbearance Agreement that same day along with a check intended to cover one of the six payments contemplated under the Forbearance Agreement.

         36. First Horizon Home Loans finally executed the Forbearance Agreement on September 21, 2009, after it had received the signed agreement from Higgins. Confusion exists as to what caused the ...

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