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Gifford v. PHH Mortgage Corp.

United States District Court, W.D. Wisconsin

June 4, 2019

TRACY L. GIFFORD, Plaintiff,


          Stephen L. Crocker, Magistrate Judge.

         Plaintiff Tracy Gifford has filed suit against defendant PHH Mortgage Corporation for claiming monetary relief against PHH for misrepresentation (intentional, negligent and strict liability) under Wisconsin law and violations of the Truth in Lending Act (TILA), 15 U.S.C. § 1601 et seq., and the Wisconsin Deceptive Trade Practices Act (DTPA), Wis.Stat. § 100.18. PHH filed a motion to dismiss (dkt. 12) that I denied on November 19, 2019 (dkt. 23). PHH now has filed a motion for summary judgment (dkt. 31), which I am granting.

         Gifford alleges that PHH failed to provide a good faith estimate of the property taxes on the home she purchased and escrowed approximately $2, 000 less than it should have to pay her first property tax bill. Gifford contends that because she was under the assumption that the escrow account would cover the entire amount that she owed for taxes, she did not make any further payment and was placed in delinquent status. To account for the tax shortfall, PHH increased her monthly mortgage payment by about $400 for two months and $168.38 thereafter, which subjected Gifford to financial hardship.

         In its motion for summary judgment, PHH renews the arguments that it made in its motion to dismiss. Specifically, PHH contends that: (1) Gifford's TILA claim is barred by the applicable statute of limitations; (2) Gifford's state law misrepresentation claims fail because PHH's escrow estimate was not a representation of fact; (3) Gifford's misrepresentation claims are barred by the economic loss doctrine; and (4) Gifford is not entitled to relief under Wis.Stat. § 100.18 because she was not was not a member of “the public” during the transaction at issue. As explained below, I conclude that PHH is entitled to summary judgment because Gifford's TILA claim is barred by the one-year statute of limitations and she has failed to show that PHH misrepresented a fact, as she is required to do to succeed on her state law claims.

         From the parties proposed findings of fact, I find the following facts to be material and undisputed:


         I. The Parties and Some Background

         Plaintiff Tracy Gifford resides at 237 Peeso Creek Lane in Mondovi, Wisconsin. Defendant PHH Mortgage Corporation, which does business as Coldwell Banker Mortgage, is incorporated in New Jersey and has its principal place of business there.

         On March 25, 2015, Gifford purchased her residence from Western Dairyland Economic Opportunity Council, Inc. To help finance her purchase, Gifford obtained a mortgage loan issued by PHH in the amount of $102, 564.00. The mortgage was recorded on April 20, 2015, in the Register of Deeds for Buffalo County, Wisconsin as Document Number 257681.

         II. Mortgage Loan

         On December 30, 2014, two Uniform Residential Loan Applications were completed in Gifford's name for an FHA mortgage in the amount of $102, 584. (The parties do not say why two applications were completed but one application lists an interest rate of 4% while the other lists a rate of 3.875%. Dkt. 34, exhs. 12 and 13.) The only signature on the applications is that of PHH employee Jamie Pond, who was Gifford's loan originator. (Pond also described herself as Gifford's “mortgage advisor” and “consultant.”) Both loan applications state that the “proposed” monthly payment for real estate taxes is $166.67.

         On January 15, 2015, Gifford made an offer to Western Dairyland to purchase the property for $120, 000. The offer contained a “Financing Contingency” clause with a maximum initial monthly payment of $794.00, including principal, interest, real estate taxes (equal to 1/12th of the estimated net annual taxes), hazard insurance, and a mortgage insurance premium. Gifford's offer also was contingent on Western Dairyland providing Gifford with a grant in the amount of $4, 200 and a loan in the amount of $15, 000.

         The grant and loan appear to be part of special programs for which Gifford was eligible as a first time home buyer who met certain education and income requirements. The mortgage agreement contains certain restrictions required by the HUD HOME Program. See dkt. 34-8.[1]

         On January 16, 2015, Pond sent Gifford a letter, acknowledging the recent loan application and asking for more information. On January 29, 2015, Pond sent Gifford “compliance disclosures, including the Good Faith Estimate (GFE).” In a cover letter accompanying the disclosures, Pond informed Gifford that “[c]ertain fees on the GFE such as title charges, appraisal fees, and taxes are based on estimates and final charges may vary from scenario to scenario.” On February 10, 2015, PHH informed Gifford that she had been preapproved for a loan in the amount of $102, 564 with a 30-year term.

         On February 17, 2015, Valuation Specialists appraised the property as having a fair market value of $136, 000. The appraisal described the property as “C1, ” which the appraisal defines as “improvements have been very recently constructed and have not previously been occupied.” Dkt. 34-17 at 3 and 10.

         Also on February 17, 2015, PHH entered a conditional commitment and endorsement of the loan, “estimating” the property's value at $136, 000 and monthly taxes in the amount of $95.06. Western Dairyland informed Pond on March 10, 2015, that it would grant Gifford $4, 550 toward a down payment and issue Gifford a second mortgage in the amount of $15, 000 to assist with the purchase of the property. Based on the above, PHH told Gifford that her monthly payment would be $709.38, which included $95.06 per month for escrow for real estate taxes.

         On March 24, 2015, PHH provided Gifford with a “Final Commitment” with the following approved loan terms: a purchase price of $120, 000, a total loan amount of $102, 564, a “total monthly payment” of $709.38, and an “initial monthly tax escrow payment” of $95.06. A footnote on the line item “initial monthly tax escrow payment” states that “[a]mount indicated is based on information received from outside parties. Although it is believed to be accurate as of the date of this Final Commitment, it is subject to change.”

         The mortgage loan closed on March 25, 2015. The closing documents included a “Final Truth-In-Lending Disclosure” that listed “Estimated Taxes Insurance (Escrows)” as $219.72 a month and the “Total Estimated Monthly Payment” as $709.38. The “Initial Escrow Account Disclosure Statement” “estimated” Gifford's city tax escrow to be $1, 140.72 a year. The “HUD-1 Settlement Statement” states that 2015 taxes are exempt and that $95.06 per month would be held in reserve for property taxes for six months for a total of $570.36. The form contains two columns comparing the GFE to the HUD-1 charges and specifically identifies the initial deposit for the escrow account-which includes the $95.06 for taxes-as a charge that can change.

         (The parties dispute whether Pond or anyone else explained to Gifford at the closing how the tax estimate was calculated, why the tax estimate had changed by the time of the closing, or that the actual tax amount may increase significantly because the estimate was based only on the value of a vacant lot.)

         Gifford elected to have PHH pay her property taxes annually on or before December 31 every year thereafter. Although Gifford agreed to provide her annual tax statement for the property to PHH on or before December 20 every year, she never did so.

         III. Calculation of Property Tax Estimate

         According to Ronald Casperite, who works as a “Complex Liason” for PHH and testified as PHH's corporate representative, in underwriting a mortgage loan, PHH verifies the borrower's income and debt, the existence of a valid sales agreement, the value of the home to be purchased, and the amount of mortgage and homeowner insurance and real estate taxes to be escrowed. See dkt. 36 at 4, 10-11.

         Typically, PHH would look at an existing tax bill to estimate real estate taxes. In 2015, PHH also may have used a nationwide computerized program called LoanSpan in conjunction with Desktop Underwriter to estimate property taxes-that program is not specific to Wisconsin. However, Gifford's property was unique because it had been owned by a nonprofit entity and involved a new construction. Prior to her purchase of the property in 2015, $0 in taxes had been levied on the property in 2013, 2014, and 2015.

         Casperite is not sure whether LoanSpan was used to calculate the $166.67 monthly estimate for Gifford's property taxes. He also does not know why that amount later changed to $95.06. The tax statements from the county listed a mill rate, and Casperite agrees that it could have been used as one of several means to calculate taxes.

         IV. Increase in Gifford's Property Taxes and ...

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