Court Opinion

ID: 4117730
Source: CourtListenerOpinion
Date Created: 2017-01-23 20:01:09.91351+00
Date Added: 2024-06-11T14:34:59.505976
License: Public Domain

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                            File Name: 17a0055n.06

                                      Case No. 16-3436

                            UNITED STATES COURT OF APPEALS
                                 FOR THE SIXTH CIRCUIT
                                                                                             FILED
                                                                                       Jan 23, 2017
ANNIE MARIE PATRICK,                                     )                         DEBORAH S. HUNT, Clerk
                                                         )
        Plaintiff-Appellant,                             )
                                                         )       ON   APPEAL    FROM THE
v.                                                       )       UNITED STATES DISTRICT
                                                         )       COURT FOR THE NORTHERN
CITIMORTGAGE, INC.,                                      )       DISTRICT OF OHIO
                                                         )
        Defendant-Appellee.                              )
                                                         )
                                                         )

Before: MERRITT, CLAY, and DONALD, Circuit Judges.

        MERRITT, Circuit Judge.            Plaintiff Annie Marie Patrick was struggling to make her

home mortgage payments after the death of her husband and the loss of his income. She

contacted defendant CitiMortgage, Inc., and contracted to reduce her monthly mortgage

payments under the Home Affordable Modification Program, a federal program designed to give

relief to homeowners falling behind on their mortgage payments.1                  The Program did not

subsidize home mortgages or give a private right of action under federal law.                    It merely

1
  The Home Affordable Modification Program was enacted pursuant to the Emergency Economic Stabilization Act,
12 U.S.C. § 5219a (2008). As part of the Home Affordable Modification Program, the Secretary of the Treasury
created regulations to guide both borrowers and lenders through the loan modification process. The Home
Affordable Modification Program Guidelines can be found at https://www.treasury.gov/press-center/press-
releases/Documents/modification_program_guidelines.pdf.
Case No. 16-3436
Patrick v. CitiMortgage, Inc.

encouraged banking institutions who had participated in securing mortgages to adjust mortgage

payments for defaulting homeowners.2

        This appeal arises from Patrick’s claim that CitiMortgage breached the contract by

mishandling her escrow account during and after the process to reduce her monthly mortgage

payments. Her principal claim is that CitiMortgage made double or duplicate premium payments

on her homeowner insurance policy. Like the district court, we conclude that the duplicate

payments were a result of Patrick’s own mistake in acquiring duplicate policies. Although we

understand Patrick’s frustration and her difficulty in understanding the mortgage modification

process, she has failed to raise any genuine issue of fact that creates liability in tort or contract on

the part of CitiMortgage.

                                                        I.

        Patrick obtained a home mortgage loan from CitiMortgage in January 2007 that is

secured by her home in Wooster, Ohio. After Patrick’s husband died 2012, she could not meet

her monthly mortgage payment and applied to modify her mortgage under the federal Home

Affordable Modification Program. Patrick was found eligible for the program and was required

to make three trial payments of $520.02. When Patrick successfully completed the trial period,

she was offered a permanent modification. In April 2013, Patrick and CitiMortgage entered into

a Home Affordable Modification Agreement that lowered Patrick’s monthly payments by

approximately $300 per month, from $816.97 to $519.78 ($414.60 for principal and interest and

$105.18 for “estimated” monthly escrow for 1-5 years. In June 2013, Patrick filed a Chapter 7

2
  Calculation of the monthly reduced payment should include, according to the Home Affordable Mortgage Program
regulations, the following expenses: modified monthly principal and interest; monthly pro-rate amount for real
estate taxes; monthly pro-rate amount for property and flood insurance, if applicable; monthly pro-rata amount for
homeowner’s association dues, condominium or cooperative unit maintenance fees and ground rent, if applicable;
and, if applicable, the projected monthly escrow shortage payment, if any. Home Affordable Modification Program
Chapter C65.1(a).

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Case No. 16-3436
Patrick v. CitiMortgage, Inc.

bankruptcy petition with the United States Bankruptcy Court for the Northern District of Ohio.

During the pendency of the bankruptcy proceeding, Patrick filed an adversary proceeding against

CitiMortgage. The essence of her claims in the bankruptcy court adversary proceeding was that

CitiMortgage breached the Modification Agreement by improperly calculating her monthly

payments in violation of the Home Affordable Modification Program regulations, and by

improperly administering her escrow account by paying “duplicate” homeowner insurance

premiums out of the account to two separate insurance companies for the same period of

coverage.   Both parties filed for summary judgment. The bankruptcy court granted summary

judgment to CitiMortgage on all Patrick’s claims in two separate opinions.             Patrick v.

CitiMortgage, Inc. (In re: Patrick), Adv. No. 13-6103, No. 13–6166, 2014 WL 7338929 (Bankr.

N.D. Ohio Dec. 22, 2014); Patrick v. CitiMortgage, Inc. (In re: Patrick), Adv. No. 13-6103, No.

13–6166, 2015 WL 1883966 (Bankr. N.D. Ohio Apr. 23, 2015). Patrick filed objections to the

bankruptcy court’s opinions and the matter was transferred to the United States District Court for

the Northern District of Ohio. The district court adopted the bankruptcy court’s findings of fact

and conclusions of law. Patrick v. CitiMortgage, Inc., No. 5:15CV1376, 2016 WL 1156348

(N.D. Ohio Mar. 24, 2016). This appeal followed.

                                                    II.

       Patrick argues that CitiMortgage breached the Modification Agreement by making

duplicate homeowner insurance premiums paid from the escrow account and then refusing to

seek a refund from the insurer.      Pursuant to her mortgage documents, it is Patrick, not

CitiMortgage, who chooses the insurance coverage and carrier and she, not CitiMortgage, is the

named insured on the policies.     Patrick’s mortgage simply requires CitiMortgage to make

payments from the escrow account as insurance and tax bills come due. Patrick’s property was

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Case No. 16-3436
Patrick v. CitiMortgage, Inc.

covered by two different homeowner insurance policies from approximately August 2012 to

August 2013 because a new policy was issued without cancelling the one already in effect. The

original policy was issued by Allied Insurance Company, which sent an invoice directly to

CitiMortgage, as is customary if the insurance premiums are paid out of the borrower’s escrow

account.    The invoice was dated July 2, 2012, and payment was due no later than

August 16, 2012. CitiMortgage paid Allied before the due date as required by the terms of the

mortgage. During the same time period, Patrick herself contacted a new insurance carrier, Ohio

Mutual Insurance Company, to issue a homeowner policy on the property because the premiums

were less expensive than those with Allied. Ohio Mutual sent an invoice to CitiMortgage dated

August 16, 2012, requiring payment by September 6, 2012. CitiMortgage paid the invoice from

Ohio Mutual, as required by the mortgage terms.

       It is unclear whether Patrick ever gave notice to CitiMortgage of the new Ohio Mutual

policy, but it is of no matter to our analysis. The insurance contract between Patrick and Allied

states that the insured may cancel the policy at any time by giving notice in writing to Allied,

and that the premium will be refunded pro rata. CitiMortgage argues correctly that pursuant to

the insurance contract, only Patrick, as the named insured, can cancel the policy or seek

reimbursement for any overcharge. The record does not show, and Patrick does not contend, that

she cancelled the policy with Allied and sought a refund after contracting with Ohio Mutual for

insurance. CitiMortgage properly paid the invoices from the escrow account to two different

insurance companies as required by the terms of the mortgage and it is not required to seek a

refund on behalf of Patrick.

                                              -4-
Case No. 16-3436
Patrick v. CitiMortgage, Inc.

           Patrick also challenges the amortization of her monthly escrow payments, arguing that

under the Home Affordable Modification Program regulations any escrow arrearage should be

capitalized over the remaining life of the loan. Patrick does not refer to any specific regulation,

but simply asserts that CitiMortgage improperly distributed her escrow payments over 60 months

instead of over the life of the loan. Contrary to Patrick’s position, the Program regulations

specifically state that any escrow arrearages may not be spread over the life of the loan and must

be paid either in a lump sum or over a 60-month period.3 CitiMortgage contends its calculation

amortizing the escrow shortage over 60 months is in accordance with the Home Affordable

Modification Program regulations. We agree and find no error in CitiMortgage’s calculation.

           Patrick also makes a claim for breach of an implied covenant of good faith and fair

dealing, an implied principle in every contract under Ohio law. But Ohio law recognizes only a

breach of contract claim; it does not recognize a free-standing or independent claim for breach of

the covenants of good faith and fair dealing. Mortg. Elec. Regis. Sys., Inc. v. Mosley, No. 93170,

2010 WL 2541245, at *11 (Ohio Ct. App. June 24, 2010); see also Wendy’s Int’l, Inc. v. Saverin,

337 F. App’x 471, 476 (6th Cir. 2009) (noting that the implied duty of good faith does not create

an independent cause of action under Ohio law); Lakota Loc. Sch. Dist. Bd. of Ed. v. Brickner,

671 N.E.2d 578, 583-84 (Ohio Ct. App. 1996) (no tort cause of action for breach of good faith

and fair-dealing separate from breach of contract claim). Patrick seems to claim that the increase

3
    The regulation states:

           The Borrower may either remit the Escrow shortage as a lump sum payment or Monthly Escrow
           Shortage Payment as part of the Target Payment. This amount may not be capitalized [over the
           life of the mortgage]. If the Borrower elects to make Monthly Escrow Shortage Payments, the
           amount must be spread equally over a 60-month period and be included when calculating the
           proposed Target Payment.

Chapter C65.6(d) (emphasis added).

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Case No. 16-3436
Patrick v. CitiMortgage, Inc.

in her monthly escrow payment resulted from “inaction” or a lack of communication from

CitiMortgage. giving rise to a breach of the covenant of good faith and fair dealing. Patrick

must, however, identify a contractual provision that was breached by CitiMortgage and she has

not done so. Because, as we explained above, we find no breach of the Modification Agreement

by CitiMortgage, there is no breach of the implied covenant of good faith and fair dealing by

CitiMortgage.

                                                          III.

           Patrick makes a variety of claims on appeal challenging the standard of review used by

the district court in reviewing the bankruptcy court’s rulings. The proceeding came to the district

court after the bankruptcy court made findings of fact and conclusions of law on the parties’

cross-motions for summary judgment, following Federal Rule of Bankruptcy Procedure 7056,

which provides that Federal Rule of Civil Procedure 56 applies in adversary proceedings in

bankruptcy. The district court correctly reviewed the bankruptcy court’s findings of fact and

conclusions of law regarding the cross-motions for summary judgment de novo under Federal

Rule of Bankruptcy Procedure 9033(d),4 employing the familiar standard for summary judgment

under Federal Rule of Civil Procedure 56. Wesbanco Bank Barnesville v. Rafoth (In re Baker &

Getty Fin. Servs., Inc.), 106 F.3d 1255, 1259 (6th Cir. 1997) (“The bankruptcy court makes

initial findings of fact and conclusions of law. The district court then reviews the bankruptcy

court’s findings of fact for clear error and the bankruptcy court’s conclusions of law de novo. . . .

4
    Rule 9033(d) reads as follows:

           (d) Standard of review

           The district judge shall make a de novo review upon the record or, after additional evidence, of
           any portion of the bankruptcy judge’s findings of fact or conclusions of law to which specific
           written objection has been made in accordance with this rule. The district judge may accept,
           reject, or modify the proposed findings of fact or conclusions of law, receive further evidence, or
           recommit the matter to the bankruptcy judge with instructions.

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Case No. 16-3436
Patrick v. CitiMortgage, Inc.

We in turn review the bankruptcy court’s findings of fact for clear error and the district court’s

conclusions of law de novo.”) (citations omitted). Both the bankruptcy court and the district

court went into considerable detail concerning the legal standards used in reaching their

decisions. We see no error.

       As recognized by Patrick, summary judgment can be granted only in the absence of any

disputes of material fact.      A fact is “material” only if its disposition will affect the legal

conclusion. Specifically, Patrick’s primary complaint seems to be that the bankruptcy court gave

more weight to the evidence presented by CitiMortgage than to her evidence, particularly her

affidavit testimony concerning the circumstances surrounding the duplicative homeowner

insurance policies. She argues that the facts in her affidavit must be accepted as true, but, like

the district court, we see no material factual dispute.

       Patrick also takes issue with the bankruptcy court’s denial of her motion to compel

certain documents relating to calculation of her escrow in the adversary proceeding and the

district court’s review of the issue. We review de novo the district court’s determination of

whether the bankruptcy court abused its discretion in ruling on discovery issues. Wright Enters.

v. S. Gas Co. (In re Wright Enters.), 77 F. App’x 356, 364 (6th Cir. 2003) (citing Keeney v.

Smith (In re Keeney), 227 F.3d 679, 683 (6th Cir. 2000)). We first note that CitiMortgage did

provide many documents to Patrick during the adversary proceeding in the bankruptcy court. In

denying Patrick’s motion to compel, the bankruptcy court found that Patrick was seeking

documents created after she had signed the Modification Agreement so they could not be

relevant in shedding light on how the escrow amount was calculated. The bankruptcy court

required CitiMortgage to submit a privilege log of documents for in camera review and found

that none were relevant to Patrick’s request. Patrick has not articulated what it is she seeks that

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Case No. 16-3436
Patrick v. CitiMortgage, Inc.

she has not received. As explained above, any increases in the amount required to be kept in the

escrow account are based on increases in her insurance premiums, not on unexplained increases

in the principal and interest. Insurance premiums are not expenditures over which CitiMortgage

has control, and the Modification Agreement notes that monthly escrow payments, and in turn

the monthly mortgage payment that Patrick must pay going forward, “may adjust periodically.”

We see no error in the bankruptcy court’s original decision or the district court’s review of the

denial of the motion to compel discovery. See Hayes v. Equit. Energy Res. Co., 266 F.3d 560,

571 (6th Cir. 2001) (affirming district court’s decision to deny motion to compel where court

determined that discovery was irrelevant to central issues in the case); Begala v. PNC Bank,

Ohio Nat’l Ass’n, 214 F.3d 776, 783 (6th Cir. 2000); Ghandi v. Police Dep’t, 747 F.2d 338

(6th Cir. 1984) (affirming district court’s decision not to compel documents where district court

determined that documents were privileged after in camera review).

         During the pendency of the proceedings in the district court, Patrick filed a motion

seeking leave to file a “supplemental pleading” to add additional claims to the Amended

Complaint filed in the adversary proceeding in the bankruptcy court. Patrick sought to add a

claim under the Real Estate Settlement Procedures Act, 12 U.S.C. §§ 2601–2617, alleging that

her escrow payment continues to rise in violation of that statute, and a claim for violation of the

covenant of good faith and fair dealing due to a breach by CitiMortgage of the Modification

Agreement based on the rising escrow amount. The district court denied the motion and we

review that denial for abuse of discretion. See, e.g., Rose v. Hartford Underwriters Ins. Co., 203

F.3d 417, 420 (6th Cir. 2000); Gen. Elec. Co. v. Sargent & Lundy, 916 F.2d 1119, 1130 (6th Cir.

1990).

                                               -8-
Case No. 16-3436
Patrick v. CitiMortgage, Inc.

       Under Federal Rule of Civil Procedure 15(d), a court may permit a party to file a

supplemental pleading setting out “any transaction, occurrence, or event that happened after the

date of the pleading to be supplemented.” However, the generally liberal pleading rules do not

apply to post-judgment motions like this one. The bankruptcy court awarded summary judgment

to CitiMortgage on all claims in April 2015. Patrick sought to supplement her complaint more

than a year after the close of discovery and several months after the bankruptcy court had filed

its findings of fact and conclusions of law awarding summary judgment to CitiMortgage. The

fact that the claim was made very late in this proceeding, after the bankruptcy court had made its

final rulings, leaves us unable to say that it was an abuse of discretion for the district court to

deny the motion to allow a supplemental pleading. See Schwartz v. City of Treasure Island,

544 F.3d 1201, 1229 (11th Cir. 2008) (“The district court did not abuse its discretion by refusing

to allow Gulf Coast to expand the scope of its lawsuit by asserting an entirely new theory of

recovery at so late a date, particularly where discovery was already well underway and Gulf

Coast could raise the new claims in another lawsuit.”); In re Wade, 969 F.2d 241, 250 (7th Cir.

1992) (“The district judge here exercised his discretion to exclude an extraneous matter to be

included in already omnifarious litigation. This was not an abuse of discretion.”); McCray v.

Carter, 571 F. App’x 392, 399 (6th Cir. 2014) (holding that the district court did not abuse its

discretion in denying leave to amend after discovery had closed).

       Finally, Patrick also argues that she was denied her “constitutional right of access to the

courts.” Patrick does not clearly articulate the basis for her claim, but it necessarily fails no

matter what theory she is advancing.      Because denial-of-access claims require government

action, Patrick could not state a viable claim for any action committed by CitiMortgage.

See Flagg v. City of Detroit, 715 F.3d 165, 173 (6th Cir. 2013). And because, as we have

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Patrick v. CitiMortgage, Inc.

explained, the bankruptcy and district courts did not err in granting summary judgment on

Patrick’s claims, she cannot state a viable cause of action for any action taken by the lower

courts, assuming that such a theory would even be cognizable.

       For the foregoing reasons, the judgment of the district court is affirmed.

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