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Jackson v. Citimortgage, Inc.

Court of Appeals of Tennessee

May 31, 2017


         Session January 18, 2017

         Appeal from the Chancery Court for Shelby County No. CH-14-1217 James R. Newsom, Chancellor

         This appeal involves a dispute between a loan servicer and a family who subsequently defaulted on a mortgage for a piece of property. The loan servicer foreclosed and sold the property according to the express terms of the mortgage note and deed of trust after the family had been in default for multiple years and after multiple failed attempts to seek loan modification. The family sued for breach of contract and the covenant of good faith and fair dealing, promissory estoppel, and intentional misrepresentation, asserting that the loan servicer promised to postpone the foreclosure sale until after completion of the most recent loan modification review process. The trial court granted summary judgment to the loan servicer on all claims. The family appealed on all four issues. We affirm the trial court's judgment in all respects.

         Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed; Case Remanded

          Webb Alexander Brewer, Memphis, Tennessee, for the appellants, L. J. Jackson and Brenda Jackson.

          Nicholas Henry Adler, Brentwood, Tennessee, for the appellee, CitiMortgage, Inc..

          John W. McClarty, J., delivered the opinion of the court, in which Arnold B. Goldin and Brandon O. Gibson, JJ., joined.



         I. BACKGROUND

         This appeal arises from a contract dispute between CitiMortgage, Inc. ("Citi") and Brenda and L.J. Jackson (collectively "the Jacksons" and individually "Mr. Jackson" and "Mrs. Jackson"). We find the findings of fact provided by the trial court to be an exhaustive and relevant summation of the record, and we draw from them below.

         On May 26, 2005, the Jacksons refinanced the mortgage on their house and property located on Ross Creek Drive in Memphis, Tennessee ("the Property"). They refinanced and obtained a new loan from Argent Mortgage Company, LLC ("Argent"). Under the terms of the refinancing and to obtain the new loan, the Jacksons executed two documents. The first document, executed May 26, 2005, was a 30-year adjustable rate mortgage note ("the Note") in the amount of $118, 750 owed to Argent. The second document, executed June 10, 2005, was a deed of trust ("the Deed") conveying a security interest in the Property to Lender (here, Argent).

         The Note required monthly payments by the Jacksons. In the event of the Jacksons' default, the Note allowed the Lender to enforce the security interest guaranteed by the Deed by accelerating the debt and the eventual sale of the Property in a foreclosure proceeding.

         Further, the Note contained a provision allowing for the free, alienable transfer of the Note by Lender (originally Argent) to another party. Whosoever possesses the Note and has the right to receive payments under it is the "Note Holder." The Note also provided in pertinent part:

Oral agreements, promises or commitments to lend money, extend credit, or forbear from enforcing repayment of a debt including promises to extend, modify, renew or waive such debt, are not enforceable. This written agreement contains all the terms Borrower(s) and Lender have agreed to. Any subsequent agreement between us regarding this Note or the instrument which secures this note, must be in a signed writing to be legally enforceable.

         On July 1, 2008, Argent transferred the servicing of the Jacksons' mortgage to Citi. The previous month, Argent had provided written notice to the Jacksons that their mortgage was being "assigned, sold or transferred" to Citi and that future payments would be owed to Citi. The notice further stated that the assignment, sale, or transfer of the mortgage loan "does not affect any terms or conditions of the mortgage instruments, other than the terms directly related to the servicing of your loan."

         Due to the adjustable rates and the recession beginning in 2008, the Jacksons first defaulted on payments on their mortgage on October 1, 2008. The Jacksons remained in default thereafter until the initiation of this lawsuit. After three months, Citi notified the Jacksons that it would only accept full payment for the past due payments to satisfy the arrearage.

         At some point, the Jacksons began the loan modification process in an attempt to salvage their mortgage and their ownership of the Property. The testimony is disputed. The Jacksons claim that they began the loan modification process before default on October 1, 2008; Citi denies this. The Jacksons assert that an unnamed Citi employee told them to cease payments to assist them in qualifying for a loan modification; Citi denies this. The trial court did not find this information material to Citi's motion for summary judgment.

         Citi sent the Jacksons a letter on December 10, 2010, notifying them that failure to cure the default for the past due amount of $26, 375.09 by January 10, 2011 would result in acceleration of the debt and subsequent foreclosure proceedings as permitted under the Note and the Deed. By that date, the Jacksons would have been in default for over 26 months. The Jacksons failed to cure the default by January 10, 2011, and Citi accelerated the debt in an effort to seek eventual foreclosure on the home.

         At some point prior to June 30, 2011, the Jacksons sought loan modification assistance from Citi. While the exact date this process began is unclear from the record, Citi mailed the first Home Affordable Modification Program ("HAMP") denial letter to the Jacksons on June 30, 2011. Citi mailed the Jacksons similar denial letters for HAMP and other loss mitigation options on November 25, 2013, June 5, 2014, and June 16, 2014.

         In late March 2014, the Jacksons received noticed from Brock & Scott, PLLC that foreclosure proceedings were being started regarding the Property. As required by the Deed, Citi named Brock & Scott Substitute Trustee so as to conduct the foreclosure proceedings on or about April 8, 2014. The Jacksons received a letter on April 29, 2014 from Brock & Scott notifying them that the foreclosure sale would take place on May 27, 2014.

         Although the record is unclear of the specific date, the Jacksons hired Chris Mitchell ("Mrs. Mitchell") of Everything Financial Company to aid them in the loan modification/HAMP process after Citi denied the Jacksons' loss mitigation options. Mrs. Mitchell exchanged emails with an employee of Citi, Stephen Ortwerth (a Making Homes Affordable Executive Response Unit Specialist) regarding the Jacksons' loan modification application. Those emails form the bulk of the Jacksons' evidence of alleged contractual malfeasance on Citi's part. The pertinent parts are reproduced below.

         Through Mrs. Mitchell, the Jacksons submitted documentation as requested by Mr. Ortwerth and Citi. Through the loan modification process and her communications with Citi, Mrs. Mitchell obtained a postponement of the foreclosure from May 27, 2014, until June 24, 2014. Brock & Scott notified the Jacksons of the postponement through certified mail postmarked on May 28, 2014. The foreclosure was again postponed until July 29, 2014, and Brock & Scott similarly sent the Jacksons notice of postponement on June 25, 2014, the day after the second foreclosure date. Mrs. Mitchell also informed the Jacksons of the second postponement.

         In a June 24, 2014 email, Mr. Ortwerth notified Mrs. Mitchell that he was monitoring the Jacksons' HAMP review and that he would notify Mrs. Mitchell of the decision by July 1, 2014. In a July 21, 2014 email, Mrs. Mitchell sent the following email to Mr. Ortwerth:

Good afternoon Mr. Ortwerth,
Thank you for this communication. However, I am a bit concerned. There is a posted sale date for July 29, 2014. I am a bit concerned, inasmuch as I have not received communication within the last 12 days. Is there a requirement for further documentation? If so, please advise. Thank you.

Mr. Ortwerth responded to Mrs. Mitchell in an email on July 22, 2014, requesting additional documentation from the Jacksons:

I hope you're well. Our Underwriter has requested some additional information from your client to complete their review file.
- [P]rovide supporting documents for L.J.'s new employment position
- 2014 year-to-date profile and loss statement for Brenda
- most recent statement (all pages) for Orion Federal Credit Union showing schedule C income
- [P]rovide three months proof of boarder income: bank statements and copies of canceled rent checks . . . .
I need this information as soon as possible and will follow up to confirm receipt or check ...

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