Moral v. PHH Mortgage Corporation

• Court: Court of Appeals for the Tenth Circuit
• Decided: June 14, 2024
• Docket: 23-3123
• Status: Unpublished

Opinion

Appellate Case: 23-3123 Document: 010111065235 Date Filed: 06/14/2024 Page: 1 FILED United States Court of Appeals UNITED STATES COURT OF APPEALS Tenth Circuit

FOR THE TENTH CIRCUIT June 14, 2024 _________________________________ Christopher M. Wolpert Clerk of Court CARLOS E. MORAL; JULIE K. MORAL,

Plaintiffs - Appellants,

v. No. 23-3123 (D.C. No. 6:21-CV-01070-HLT) PHH MORTGAGE CORPORATION; (D. Kan.) OCWEN LOAN SERVICING, LLC,

Defendants - Appellees,

and

BANK OF NEW YORK MELLON TRUST COMPANY, THE NATIONAL ASSOCIATION,

Defendant. _________________________________

ORDER AND JUDGMENT* _________________________________

Before MATHESON, BALDOCK, and McHUGH, Circuit Judges. _________________________________

* After examining the briefs and appellate record, this panel has determined unanimously that oral argument would not materially assist in the determination of this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore ordered submitted without oral argument. This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel. It may be cited, however, for its persuasive value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1. Appellate Case: 23-3123 Document: 010111065235 Date Filed: 06/14/2024 Page: 2

Carlos E. Moral and Julie K. Moral appeal the district court’s grant of

summary judgment in favor of PHH Mortgage Corporation (“PHH”) and Ocwen

Loan Servicing LLC (“Ocwen”). Exercising jurisdiction under 28 U.S.C. § 1291, we

affirm.

I. BACKGROUND

A. Factual History

The Morals executed a mortgage to secure a loan to buy a home. The

mortgage was assigned and then reassigned to various lenders, ultimately to Bank of

New York Mellon Trust Company, N.A. (“BONY”). Ocwen later acquired the

mortgage servicing rights. When Ocwen merged with PHH, PHH became the loan

servicer.

After the Morals paid off the loan in full, PHH asked Indecomm Holdings, Inc.

(“Indecomm”), a third-party vendor, to file a satisfaction of mortgage with the Grant

County Recorder of Deeds (the “County”).1 On the filing, Indecomm mistakenly

listed a prior mortgage assignee as the releasing party instead of BONY. As a result,

the County rejected the filing and returned it to PHH.

The Morals emailed the Office of the State Bank Commissioner for Kansas

(“OSBC”), complaining that “[t]he lien release [wa]s not from the correct party.”

Aplt. App., Vol. III at 445. The OSBC contacted PHH about the complaint.

1 Originally, Indecomm was named as a defendant. The parties later stipulated to its dismissal with prejudice.

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After a few weeks of investigation, PHH discovered the mistake and filed a

new satisfaction of mortgage that correctly listed BONY as the releasing party. PHH

sent copies of the recorded satisfaction to both the Morals and the OSBC, and the

OSBC informed the Morals that PHH had properly filed the release of lien.

B. Procedural History

The Morals sued PHH and Ocwen, alleging that the erroneous release violated

the Kansas Consumer Protection Act (“KCPA”) and the Real Estate Settlement

Procedures Act (“RESPA”). After the parties filed a pretrial order, PHH and Ocwen

moved for summary judgment. In opposition, the Morals argued the pretrial order

included two additional KCPA claims related to (1) additional interest liability they

accrued from delayed payoff of their loan and (2) PHH and Ocwen’s failure to record

a power of attorney.

The district court held that the pretrial order did not cover the additional

KCPA claims. It then granted PHH and Ocwen’s motion for summary judgment,

finding that the Morals failed to present evidence supporting their claims. The

Morals timely appealed.

II. DISCUSSION

A. Scope of the Pretrial Order

The Morals argue the district court abused its discretion when it held the

pretrial order did not cover their additional KCPA claims. Because the pretrial order

alleged a KCPA claim related only to release of the loan, the court did not abuse its

discretion by limiting the pretrial order to that claim.

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“Because the district court is in the best position to interpret its pretrial order,”

we review its dismissal of claims not contained in the pretrial order for abuse of

discretion. Tyler v. City of Manhattan, 118 F.3d 1400, 1403 (10th Cir. 1997). “A

district court abuses its discretion when it renders an arbitrary, capricious, whimsical,

or manifestly unreasonable judgment.” Vincent v. Nelson, 51 F.4th 1200, 1213 (10th

Cir. 2022) (quotation marks omitted). “We . . . defer to the district court’s judgment

so long as it falls within the realm of . . . rationally available choices.” Id.

(quotations omitted).

Legal Background

Federal Rule of Civil Procedure 16(d) provides that “[a]fter [a pretrial

conference], the court should issue an order reciting the action taken. This order

controls the course of the action unless the court modifies it.” “The . . . pretrial order

measures the dimensions of the lawsuit, both in the trial court and on appeal.”

Youren v. Tintic Sch. Dist., 343 F.3d 1296, 1304 (10th Cir. 2003). Fed. R. Cir. P.

16(e) states that “[t] he court may modify the [pretrial] order . . . only to prevent

manifest injustice.” “Claims, issues, defenses, or theories of damages not included in

the pretrial order are waived.” Cortez v. Wal-Mart Stores, Inc., 460 F.3d 1268, 1277

(10th Cir. 2006) (quotation marks omitted).

“[A] pretrial order should be liberally construed to cover any of the legal or

factual theories that might be embraced by its language.” Koch v. Koch Indus., Inc.,

203 F.3d 1202, 1220 (10th Cir. 2000) (alterations and quotations omitted). The

court, however, “may more strictly construe [a pretrial] order when the party favoring 4 Appellate Case: 23-3123 Document: 010111065235 Date Filed: 06/14/2024 Page: 5

a liberal construction has had ample opportunity to refine the order and when the

final order is properly drawn and substantially specific.” Id. at 1220-21. Parties

cannot avoid the pretrial order’s binding effect by raising new issues in a response to

a motion for summary judgment. See Hullman v. Bd. of Trs. of Pratt Cmty. Coll.,

950 F.2d 665, 667 (10th Cir. 1991).

Additional Procedural History

a. Complaint and pretrial order

The parties filed a pretrial order in which the Morals claimed PHH and Ocwen

violated the KCPA through their “deceptive acts and practices” as described in Count

III of their complaint. Aplt. App., Vol. I at 213. In Count III, the Morals alleged

PHH and Ocwen “willfully us[ed] falsehoods and ambiguities in the creation and

filing of the Morals’ mortgage release filed with the Grant County Register of

Deeds,” and that “PHH further knowingly permitted Indecomm to allow its

employees to execute both release documents as ‘Vice President’ of both PHH and its

formerly merged and non-existent legal entity Ocwen.” Id. at 39.

b. Summary judgment

In opposition to summary judgment, the Morals argued PHH violated the

KCPA by (1) making several misrepresentations to the Morals that delayed their

ability to pay off their loan and caused additional interest to accrue and (2) failing to

record a power of attorney.

The district court rejected this argument, concluding the Morals were

attempting expand their KCPA claim to issues outside the pretrial order, which

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covered only PHH and Ocwen’s alleged misconduct in the preparation and filing of

the mortgage release. It explained that the Morals “could have sought to formally

amend” the pretrial order to include these KCPA claims, “[b]ut [they] chose to stand

on their KCPA claim as stated in their . . . Complaint.” Id., Vol. IV at 681. The

court noted that although the complaint described the obstacles the Morals faced in

paying off their loan, “those [allegations] were the subject of other claims” that the

court had dismissed “some time ago,” “not the KCPA claim.” Id. at 682. Because

“allow[ing] [the Morals] to expand the scope of their KCPA claim now that most of

their RESPA claims have been dismissed [would be] unfair, inefficient, and not in the

interest of justice,” the court “limit[ed] the scope of [the Morals’] KCPA claim to

encompass the activities and alleged aggrievement identified in Complaint.” Id.2

Application

The Morals argue the district court abused its discretion by concluding the pretrial

order did not cover its KCPA claims related to delayed payoff of its loan and failure to

record power of attorney. They contend that (1) Trujillo v. Uniroyal Corp., 608 F.2d 815

(10th Cir. 1979), requires the district court to liberally construe the pretrial order; (2) the

2 The court also determined the Morals’ power of attorney argument failed as a matter of law because “powers of attorney need not be recorded in Kansas.” Id. at 685 n.6 (citing Kan. Stat. Ann. § 58-652(c)(1)). 6 Appellate Case: 23-3123 Document: 010111065235 Date Filed: 06/14/2024 Page: 7

pretrial order refers to the complaint, which covers those claims; and (3) the pretrial

order’s factual contentions support their claims. We disagree.

a. Trujillo v. Uniroyal Corp., 608 F.2d 815 (10th Cir. 1979)

The Morals argue the district court failed to liberally construe the pretrial

order, as Trujillo requires. Id. at 818. We disagree. In Trujillo, the pretrial order

described the plaintiff’s claim as “strict liability.” Id. When the defendant learned

that the plaintiff planned to prove liability on a failure-to-warn theory, it objected,

arguing the pretrial order did not contain that theory. We held the plaintiff’s reading

of the pretrial order did not exceed the complaint when he “loosely used” a “term of

art”—“strict liability”—to describe his claim in the order. Id. We explained that

“strict construction [of the pretrial order] to avoid surprise or unreasonable ballooning of

the trial [wa]s not necessary” because there were “only three closely related

theories”—“manufacturing flaw, design defect, and failure to warn”— “underlying

[the] term of art.” Id.

By contrast, a KCPA claim may include more than just a few closely related

theories, and the Morals specifically linked their claim to Count III of the complaint,

which alleged only flaws in the mortgage release. The district court did not abuse its

discretion in limiting the KCPA claim to the mortgage release filing. Trujillo does

not indicate otherwise.

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b. Allegations in the complaint

The Morals argue the pretrial order incorporates Count III of their complaint,

including their KCPA claims for the delayed payoff of their loan and for failure to

record power of attorney. This argument fails.

On the alleged delayed pay off, the Morals argue Count III “expressly alleges”

they suffered “actual damages linked to the unmarketability of their home [resulting]

from” deceptive acts and practices. Aplt. Reply Br. at 3. But the Morals did not list

accrued interest damages in the complaint or the pretrial order.3

On the power of attorney, the Morals did not use the term “power of attorney”

anywhere in the complaint, and their KCPA claim alleged the wrong party executed

the initial release—not that PHH and Ocwen failed to record a power of attorney. 4

c. Factual allegations in the pretrial order

The Morals argue their factual allegations in the pretrial order include a KCPA

claim for delayed payoff of their loan. They provide no authority to support that a

3 In the pretrial order, the Morals listed damages for (1) “Emotional Distress, Time, and Inconvenience”; (2) “Diminished Property Value/Lost Sale Opportunity due to Unmarketable Title”; (3) “Civil Penalties pursuant to KCPA”; (4) “Punitive Damages pursuant to KCPA”; and (5) “Attorneys’ Fees to date pursuant to KCPA.” Aplt. App., Vol. I at 214. 4 The power-of-attorney claim would fail in any event because the Morals were not “aggrieved” by the failure to record a power of attorney. See Kan. Stat. Ann. § 50-634(a),(b) (providing generally that a consumer may not bring a private KCPA action for damages or a civil penalty unless the consumer has been aggrieved). The district court found no evidence that any of the alleged flaws in the release affected the marketability of their home. See Aplt. App., Vol. IV at 685. 8 Appellate Case: 23-3123 Document: 010111065235 Date Filed: 06/14/2024 Page: 9

pretrial order’s factual allegations may provide defendants notice of an additional

claim for relief not described elsewhere in the order.

* * * *

The district court therefore did not abuse its discretion when it limited the

Moral’s KCPA claim to the mortgage release.

The Morals did not present sufficient evidence to create a genuine dispute of

material fact for their KCPA or RESPA claim.

“We review the district court’s grant of summary judgment de novo, applying

the same standard used by the district court.” Riser v. QEP Energy, 776 F.3d 1191,

1195 (10th Cir. 2015). “The court shall grant summary judgment if the movant

shows that there is no genuine dispute as to any material fact and the movant is

entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a).

KCPA Claim

The Morals argue they presented sufficient evidence that they were aggrieved

to survive summary judgment on their KCPA claim for improper release of their

loan. We disagree.

a. Legal background

Plaintiffs must establish that a KCPA violation “aggrieved” them. See Via

Christi Reg’l Med. Ctr., Inc. v. Reed, 314 P.3d 852, 863 (Kan. 2013); see also Kan.

Stat. Ann. § 50-634(a),(b) (providing generally that a consumer may not bring a

private KCPA action for damages or a civil penalty unless the consumer has been

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aggrieved). To establish aggrievement, a KCPA plaintiff must demonstrate the

deceptive act caused the claimed injury. See Schneider v. Liberty Asset Mgmt., 251

P.3d 666, 671 (Kan. Ct. App. 2011).

b. Additional procedural history

PHH and Ocwen moved for summary judgment on the KCPA claim,

arguing the Morals were not aggrieved consumers. The district court agreed and

granted summary judgment because the Morals presented no evidence that the release

of their loan affected their home’s marketability.

c. Application

The Morals argue they were aggrieved because PHH and Ocwen imposed a

lien through deception. Even if this were so, the Morals still needed to show harm.

Because they presented no evidence that the release affected their home’s

marketability, they were not “aggrieved” under the KCPA and could not recover

damages. As the district court stated, “[the Morals] offer[ed] nothing but

unsupported speculation that they have been aggrieved by Defendants’ actions. They

have not placed their house on the market or submitted testimony of a real estate

agent or an agent for a title company.” Aplt. App., Vol. IV at 685. PHH and Ocwen

were entitled to summary judgment on the KCPA claim.

RESPA Claim

The Morals argue they presented sufficient evidence to survive summary

judgment on their RESPA claim. We disagree.

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“Under RESPA, a servicer of a federally related mortgage loan may be liable for

damages to a borrower if it fails to adequately respond to a qualified written request

(QWR).” Berneike v. CitiMortgage, Inc., 708 F.3d 1141, 1145 (10th Cir. 2013)

(quotations omitted); see also 12 U.S.C. § 2605(e)-(f). A QWR is “a written

correspondence” that includes “a statement of the reasons for the belief of the borrower

. . . that the account is in error . . . .” Id. § 2605(e)(1)(B)(ii). When the borrower submits

a QWR, the servicer has 30 days to either correct the error or conduct a reasonable

investigation and explain why the account is correct. Id. § 2605(e)(2)(A),(B); 12 C.F.R.

§ 1024.35(e)(1)(i)(A),(B), (3)(i)(C).

To prevail on a RESPA claim, borrowers must show actual damages from a

servicer’s noncompliance. See 12 U.S.C. § 2605(f)(1)(A); see also Toone v. Wells Fargo

Bank, N.A., 716 F.3d 516, 523 (10th Cir. 2013) (dismissing complaint under Fed. R. Civ.

P. 12(b)(6) for failure to plead actual damages); Wirtz v. Specialized Loan Servicing,

LLC, 886 F.3d 713, 720-21 (8th Cir. 2018) (remanding with directions to enter summary

judgment in favor of loan servicer where plaintiff failed to present evidence of damages

resulting from servicer’s failure to comply with RESPA).

In response to the summary judgment motion, the Morals argued that PHH

violated RESPA because it “failed to conduct a reasonable investigation in

connection to its response because it used a vendor to conduct the investigation into

the missing mortgage assignment and the vendor filed a mortgage release that [the

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Morals] believe[d] ha[d] other shortcomings.” Aplt. App., Vol. IV at 690 (district

court order).5 The district court found that the Morals’ “arguments suffer[ed] a

timing issue” because they discovered the new alleged errors after PHH investigated

the Morals’ original QWR and corrected the release. Id. at 691. The Morals “could

have filed a QWR identifying” the new issues, but “[t]hey did not.” Id.

The Morals argue they presented sufficient evidence of a RESPA violation to

survive summary judgment. They did not. When PHH received the QWR,6 it

investigated and corrected the error. The Morals presented no evidence that PHH

discovered other errors during its investigation that would render the release

ineffective. If the Morals believed PHH’s investigation or the new release contained

errors, they could have filed a QWR identifying those issues, but they did not.

III. CONCLUSION

We affirm the district court’s judgment.

Entered for the Court

Scott M. Matheson, Jr. Circuit Judge

5 In the pretrial order, the Morals also alleged PHH violated RESPA by failing to correct the QWR’s alleged error, Aplt. App., Vol. IV at 689, but they conceded that PHH had corrected the release at summary judgment. See id., Vol. III at 410. 6 The parties agree that Mr. Moral’s email complaining about the wrong party having executed the release was a QWR. 12