Scott-Gage v. JP Morgan Chase Bank et al

UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
In re 	: 	Chapter 13
PAMELA SCOTT-GAGE 	:
Debtor 	: 	Bankruptcy No. 05-10069
PAMELA SCOTT-GAGE 	:
___________________________________
Plaintiff 	:
v.
:
JP MORGAN CHASE BANK
WMC MORTGAGE CORPORATION 	: 	Adversary No. 05-0171
GMAC MORTGAGE CORPORATION
and PLANTINUM FINANCIAL, INC. 	:
Defendant
.................................................
MEMORANDUM
.................................................
Defendants JP Morgan Chase Bank, WMC Mortgage Corporation, and
GMAC Mortgage Corporation have moved for summary judgment against the plaintiff,
Pamela Scott-Gage. The plaintiff opposes the relief sought, in part only. Upon
consideration of the motion and answer thereto with accompanying affidavits, plus the
parties’ joint pretrial statement providing a statement of uncontested facts, I find that the
following facts are not disputed for purposes of the instant motions.
Case 05-00171-bif Doc 38 Filed 03/17/06 Entered 03/20/06 11:57:50 Desc Main
Document Page 1 of 14

2
I.
On June 24, 2002, the plaintiff entered into a loan transaction with
defendant WMC to refinance an existing mortgage on her residence: 3 Linden Terrace,
Philadelphia, Pennsylvania. In connection with this loan, the plaintiff executed a
promissory note in the amount of $48,800, payable to WMC, and bearing an interest rate
of 11.75%. The note provided that the plaintiff would tender $492.59 per month for 30
years, beginning on September 1, 2002. In addition to this promissory note, the plaintiff
signed a mortgage in favor of WMC, using her residence as collateral.
The loan settlement date was July 24, 2002. The settlement statement, or
HUD-1A form, reflects that $43,073.69 of the loan proceeds was to be paid to various
creditors of the plaintiff, $1,429.28 was to be disbursed to the plaintiff, and $4,297.02 of
the proceeds was payable as fees. The disbursement date was July 29, 2002.
The following fees are itemized on the settlement statement as payable from
the loan proceeds, totaling $4,297.03
Appraisal Fee to Platinum Financial 	$250.00
Origination Fee to Platinum Financial 	$1,641.44
Processing Fee to Platinum Financial 	$295.00
Interest from 7/28/02 to 8/1/02 	$47.10
Hazard Insurance Premium to Civic Property 	$768.74
Settlement or closing fee to Lawyers Land 	$395.00
Services
Notary Fees to Clerk 	$25.00
Title Insurance to Lawyers Land Services 	$522.75
End[orsements] . . . to Lawyers Land Services $150.00
Recording Fees . . . 	$92.00
CPL to Old Republic 	$35.00
Wire Fee to Lawyers Land Services 	$20.00
Tax Cert to Lawyers Land Services 	$15.00
Courier Fee to Lawyers Land Services 	$40.00
Case 05-00171-bif Doc 38 Filed 03/17/06 Entered 03/20/06 11:57:50 Desc Main
Document Page 2 of 14

3
In addition, a fee identified on the settlement sheet but not payable from the loan proceeds
was described as follows: “Broker comp for services to Platinum Financial P.O.C.
976.00.”
A Federal Truth in Lending Disclosure Statement, dated July 24, 2002,
bears the plaintiff’s signature and also contains her initials. This loan disclosure
statement revealed that the loan from WMC Mortgage Corp. had an annual percentage
rate (“APR”) of 12.7392% , a finance charge of $132,021.55, an amount financed of
$45,316.43, and total payments of $177,337.98. In addition, the disclosure statement
noted, inter alia, that the plaintiff was granted a security interest in the Linden Terrace
realty, that property insurance was required, and that the borrower was free to “obtain the
insurance from anyone that is acceptable to creditor.”
The plaintiff apparently also signed and dated a document reflecting the
itemization of the amount financed. From this document it is clear that the amount
financed was calculated by subtracting from the loan amount ($48,800) the origination
fee and processing fee paid to Platinum Financial (identified only as the “broker”), the
prepaid interest fee, a settlement or closing fee to the title company, estimated to be
$1,000, and an attorney’s fee, estimated to be $500.
This document also stated that certain charges would be “paid to others on
your behalf by creditor.” Those charges were the appraisal fee “to Bruce P. Boiwin,” plus
the property insurance, notary and recording fees, and the title insurance premium. The
amounts identified are the same or close to the actual figures identified on the HUD-1A
settlement sheet, except for the title insurance cost.
Case 05-00171-bif Doc 38 Filed 03/17/06 Entered 03/20/06 11:57:50 Desc Main
Document Page 3 of 14

4
All the defendants have attached to their summary judgment motions copies
of a Notice of Right to Cancel, apparently signed and dated by the plaintiff, as well as a
document signed by the plaintiff and dated July 24, 2002, wherein the plaintiff
acknowledges “receipt of a copy of our loan documents from our settlement agent.”
Despite this acknowledgment, the plaintiff has submitted an affidavit in opposition to
summary judgment, in which she avers, in part:
6. The [loan] settlement was conducted somewhere just
outside of Philadelphia at an office. During settlement, I was
asked to sign numerous documents. At the end of the
settlement, I did not receive copies of any of the documents
that I signed.
7. Several days after the settlement, I received a package of
papers relating to the loan transaction in the mail. I put all of
these papers away in a cabinet. I took them to my present
lawyer when he asked me for them. I do not believe that I lost
any papers and that what I took to him was all that I received
in mail after the settlement.
8. I do not know what all the papers that I signed were, I did
not know what papers I was supposed to get at or after the
settlement. However, since what I now know is a Truth-in-
Lending Disclosure Statement and a Notice of Right to
Cancel were not among the papers that I received in the mail
and gave to my lawyer, it is obvious that I did not receive any
such papers.
The parties agree that after this loan closed, the note and mortgage were
later assigned to JP Morgan Chase Bank. There is an affidavit from Mr. Thomas Moan,
an employee with GMAC, who swears that defendant GMAC is simply the mortgage loan
servicer, and has been since June 2, 2003. JP Morgan Chase Bank is the “trustee for
Plaintiff’s loan, which is being held by Residential Asset Mortgage Products, Inc. series
2003-RP2.” Furthermore, JP Morgan Chase Bank has been trustee since September 5,
2003.
Case 05-00171-bif Doc 38 Filed 03/17/06 Entered 03/20/06 11:57:50 Desc Main
Document Page 4 of 14

5
The parties also agree that the plaintiff never received any pre-settlement
loan disclosures within the scope of the Home Owners Equity Protection Act
(“HOEPA”).
On November 8, 2004, counsel for the plaintiff sent a letter to JP Morgan
Chase Bank and to GMAC Mortgage Corporation asserting the plaintiff’s right to rescind
the July 2002 loan transaction. On January 3, 2005, the plaintiff filed a voluntary petition
in bankruptcy under chapter 13. On January 20, 2005, JP Morgan Chase Bank filed a
secured proof of claim in the bankruptcy case, asserting a debt in the amount of
$54,674.43, with pre-bankruptcy loan arrearages totaling $6,293.79. The claim also
reveals that a judgment in mortgage foreclosure had been entered against the debtor on
October 26, 2004.
II.
Defendants WMC Mortgage Corp. and JP Morgan Chase Bank now seek
summary judgment as to Counts I, II, and III. In general, summary judgment should be
granted only if a court concludes that “there is no genuine issue as to any material fact
and that the moving party is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(c) (incorporated in bankruptcy proceedings by Fed. R. Bankr. P. 7056). The moving
party bears the burden of proving that no genuine issue of material fact is in dispute.
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 n. 10 (1986).
The purpose of summary judgment is to avoid the expense and delay of an
unnecessary trial when no material facts are legitimately contested and one of the parties
Case 05-00171-bif Doc 38 Filed 03/17/06 Entered 03/20/06 11:57:50 Desc Main
Document Page 5 of 14

6
is entitled to prevail on the merits. See, e.g., Goodman v. Mead Johnson & Co., 534 F.2d
566, 573 (3d Cir. 1976), cert. denied, 429 U.S. 1038 (1977).
As explained by the Third Circuit Court of Appeals:
Summary judgment is appropriate when the moving party is
entitled to judgment as a matter of law and there is no genuine
dispute of material fact. Gottshall v. Consolidated Rail Corp.,
56 F.3d 530, 533 (3d Cir. 1995) (citing Fed. R. Civ. P. 56(c)).
In order to defeat “a properly supported summary judgment
motion, the party opposing it must present sufficient evidence
for a reasonable jury to find in its favor.” Groman v.
Township of Manalapan, 47 F.3d 628, 633 (3d Cir. 1995)
(citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
250-52, 106 S. Ct. 2505, 2511-12, 91 L. Ed. 2d 202 (1986)).
In essence, the non-moving party must demonstrate a dispute
over facts that might affect the outcome of the suit. Id.
Moreover, in reviewing the record, we must give the
non-moving party the benefit of all reasonable inferences.
Josey v. John R. Hollingsworth Corp., 996 F.2d 632, 637 (3d
Cir. 1993).
Hampton v. Borough of Tinton Falls Police Dep’t, 98 F.3d 107, 112 (3d Cir. 1996); see In
re Saler, 205 B.R. 737, 741 (Bankr. E.D. Pa. 1997).
“[The court must] view the underlying facts and all reasonable inferences
therefrom in the light most favorable to the party opposing the motion.” Pennsylvania
Coal Ass’n v. Babbitt, 63 F.3d 231, 236 (3d Cir. 1995); see also Helen L. v. DiDario, 46
F.3d 325, 329 (3d Cir.), cert. denied sub nom. Pennsylvania Secretary of Public Welfare
v. Idell S., 516 U.S. 813 (1995); Valhal Corp. v. Sullivan Associates, Inc., 44 F.3d 195,
200 (3d Cir. 1995); Goodman v. Mead Johnson, 534 F.2d at 573.
The moving party bears the burden of proving that no genuine issue of
material fact is in dispute. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.
574, 586 n. 10 (1986). Once the movant has carried its initial burden, the nonmoving
Case 05-00171-bif Doc 38 Filed 03/17/06 Entered 03/20/06 11:57:50 Desc Main
Document Page 6 of 14

7
party “must come forward with ‘specific facts showing that there is a genuine issue for
trial.’” Id., at 587 (quoting Fed. R. Civ. P. 56(e)).
As explained by the Third Circuit:
At the summary judgment stage of proceedings, if the movant
– in this case the Defendants – can point to the absence of any
factual support for one of [the] essential elements [of the
complaint], then the non-movant, bearing the burden of
persuasion at trial, must introduce specific facts showing a
need for trial, pursuant to Fed. R. Civ. P. 56(e). See Celotex,
477 U.S. at 322-24, 106 S. Ct. 2548. If the non-moving party
fails to go beyond conclusory allegations in its pleadings and
to produce specific facts indicating that there is a genuine
issue for trial, summary judgment will be granted in favor of
the moving party.
Annulli v. Panikkar, 200 F.3d 189, 198-99 (3d Cir. 1999) (citations omitted).
III.
On March 22, 2005, the debtor commenced the above captioned adversary
proceeding. The complaint alleges three causes of action. Count I, against WMC, JP
Morgan and GMAC, alleges violations of the federal Truth-in-Lending Act (“TILA”) and
HOEPA, specifically the failure to provide all required loan disclosures and the failure to
provide accurate loan disclosures. 	In Count II, she asserts against all defendants
violations of the Pennsylvania Credit Services Act. And in Count III, the plaintiff avers
Case 05-00171-bif Doc 38 Filed 03/17/06 Entered 03/20/06 11:57:50 Desc Main
Document Page 7 of 14

Counts II and III are also raised against another defendant: Platinum Financial,1
Inc. This defendant has not filed any response to the complaint and, at plaintiff’s request,
judgment by default will be entered against Platinum.
8
that all of the defendants violated the Pennsylvania Unfair Trade Practices and Consumer
Protection Law. 1
In her joint pretrial statement and memorandum in opposition to summary
judgment, the plaintiff agrees to dismiss all three claims against defendant GMAC and to
dismiss Counts II and III against defendants JP Morgan Chase Bank and WMC Mortgage
Corporation. Thus, the only remaining claim to be considered in connection with the
instant motions for summary judgment are the TILA and HOEPA claims found in Count I
against defendants JP Morgan Chase Bank and WMC Mortgage Corporation.
A primary issue posed by the plaintiff’s remaining claim against these two
defendants is her assertion that she never received a copy of the requisite loan disclosure
documents at the time of the loan. If true, this would be a violation of TILA, given that
the plaintiff’s home served as collateral for the loan. See, e.g., Beach v. Ocwen Federal
Bank, 523 U.S. 410, (1998):
Under the Truth in Lending Act, 82 Stat. 146, 15 U.S.C. §
1601 et seq., when a loan made in a consumer credit
transaction is secured by the borrower’s principal dwelling,
the borrower may rescind the loan agreement if the lender
fails to deliver certain forms or to disclose important terms
accurately. See 15 U.S.C. § 1635.
The plaintiff should have been given notice of her right to rescind, as well
as notice of various material loan terms. These required disclosures are to be in writing
on forms that the borrower is given for retention at the loan closing. See, e.g., Bumpers
v. Bank One, N.A., 2003 WL 22119929, at *3 (N.D. Ill. 2003); Walters v. First State
Case 05-00171-bif Doc 38 Filed 03/17/06 Entered 03/20/06 11:57:50 Desc Main
Document Page 8 of 14

9
Bank, 134 F. Supp. 2d 778, 781 (W.D. Va. 2001); Jenkins v. Landmark Mortgage Corp.,
696 F. Supp. 1089, 1093 (W.D. Va. 1988).
The defendants do not contest that summary judgment should be denied if
there were a material fact in dispute regarding the plaintiff’s receipt of required TILA
disclosures at the time of the loan closing. However, both WMC and JP Morgan Chase
rely upon the plaintiff’s signatures upon the various loan documents dated July 24,
2002—the date of the loan closing—as well as upon her signed acknowledgment of
receipt of these documents, also dated July 24, 2002, as proof that she received copies of
all required loan forms and notices at the time the loan was made. (A copy of the
plaintiff’s acknowledgment was attached to the JP Morgan Chase submission as Exhibit
Gage-2 and to the WMC submission as Exhibit F.)
The plaintiff does not dispute that she signed the various documents and the
acknowledgment of receipt. However, by virtue of 15 U.S.C. § 1635(c), “written
acknowledgment of receipt of any disclosures required under this subchapter by a person
to whom information, forms, and a statement is required to be given pursuant to this
section does no more than create a rebuttable presumption of delivery thereof.” Thus, the
July 24th acknowledgment signed by the plaintiff is not conclusive on this issue, but
shifts the evidentiary burden to her to rebut the presumption of receipt. The plaintiff
attempts to meet her burden via her affidavit, quoted above, wherein she avers that she
only received some of the documents by mail, days after the loan closing.
The defendants argue that her averments, by themselves, are insufficient to
meet her evidentiary burden and thus they are entitled to summary judgment on this
Case 05-00171-bif Doc 38 Filed 03/17/06 Entered 03/20/06 11:57:50 Desc Main
Document Page 9 of 14

10
aspect of her TILA claim. The plaintiff counters that she is entitled to a trial on the
question of her receipt of the loan documents, where her credibility can be determined.
One issue posed in this adversary proceeding—whether a TILA plaintiff
can overcome the section 1635(c) presumption and avoid summary judgment, by
swearing that she never received the requisite loan documents—has divided courts. Some
courts have held or suggested that the borrower’s denial of receipt, by itself, is sufficient
to create a triable issue. See, e.g., Stutzka v. McCarville, 420 F.3d 757, 762 (8th Cir.
2005) (“Gibilisco’s affidavit, at the very least, would have rebutted the presumption of
delivery”); In re Jones, 298 B.R. 451, 459 (Bankr. D. Kan. 2003); see also Davison v.
Bank One Home Loan Services, 2003 WL 124542, at *4 n.7 (D. Kan. 2003).
Other courts have held to the contrary. See, e.g., Golden v. Town &
Country Credit, 2004 WL 229078, at *2 (D. Minn. 2004); see also McCarthy v. Option
One Mortgage Corp., 362 F.3d 1008, 1011 (7th Cir. 2004) (“Evidence of regular office
procedures and customary practices of a sender gives rise to a presumption of delivery
and this Court has rejected the notion that this type of evidence may be rebutted by a mere
denial of receipt.”); Williams v. First Government Mortgage and Investors Corp., 225
F.3d 738, 751 (D.C. Cir. 2000) (“[B]ecause Williams offered no evidence of non-delivery
beyond his trial testimony, we affirm the district court’s determination that Williams
failed to rebut the presumption of delivery.”).
Two recent decisions from the District Court for the Eastern District of
Pennsylvania fall into the latter group. In Oscar v. Bank One, 2006 WL 401853, at *3
(E.D. Pa. 2006) and Strang v. Wells Fargo, 2005 WL 1655886, at *3 (E.D. Pa. July 13,
2005), two district court judges held that a plaintiff/borrower’s verified statement that he
Case 05-00171-bif Doc 38 Filed 03/17/06 Entered 03/20/06 11:57:50 Desc Main
Document Page 10 of 14

Plaintiff’s attorney in this proceeding also represented the losing plaintiffs in2
Strang and Oscar.
11
did not receive required loan disclosures was insufficient to overcome the statutory
presumption of receipt to create a triable issue, and so summary judgment was granted in
favor of the defendant/lender. 	The Strang court explained:
Although the Third Circuit Court of Appeals has not
explicitly addressed this issue, other Circuits have found that
a borrower’s testimony that disclosures were not provided,
without more, is insufficient to rebut the presumption that
disclosure occurred where there is written acknowledgment of
receipt.
Id., at *3.
The defendants in this adversary proceeding maintain that the Strang
holding is correct and should be followed. JP Morgan Chase Memorandum, at 10; WMC
Memorandum, unpaginated, at IV(1)(B). The plaintiff in this proceeding argues that the
approach in Strang is incorrect and should not be followed. Indeed, she further contends
that the Strang decision is currently on appeal before the Third Circuit Court of Appeals. 2
The docket entries of that court so reflect a pending appeal from the district court decision
in that case. Docket No. 05-5154.
Given that the Strang ruling regarding the borrower’s failure to rebut the
presumption found in section 1635(c) occurred in the context of summary judgment, and
so was not a credibility finding, affirmance of summary judgment can only occur if the
Court of Appeals upholds the district court’s ruling on that issue. Furthermore, the
appellate court is likely to rule on this appeal in a matter of months.
Were I to grant the defendants’ summary judgment motion, there likely
would be a protective appeal, at least on the issue of delivery of the loan documents.
Case 05-00171-bif Doc 38 Filed 03/17/06 Entered 03/20/06 11:57:50 Desc Main
Document Page 11 of 14

12
Were I to deny the motion, and if the defendants did not seek an interlocutory appeal, the
trial might involve an issue not properly before me, for which the parties would undergo
the expense of preparation.
In light of the pending appeal in Strang, which appeal is likely to address
the very issue before me and be binding upon this court, I shall defer ruling on the matter
pending the outcome of that appeal. See Cosby v. Mellon Bank, N.A., 407 F. Supp. 233,
234 (W.D. Pa. 1976) (“On October 2, 1975, the Court held a hearing on the summary
judgment motions but deferred its decision until the disposition of the “acceleration
clause issue” which was pending before the United States Court of Appeals for the Third
Circuit in the case of Johnson v. McCrackin-Sturman Ford, Inc. . . .” ). Once the Strang
appeal is decided, I can determine whether trial is necessary and, if unnecessary, resolve
the remaining issues surrounding Count I, already briefed and argued by the various
parties.
An appropriate order shall be entered.
Case 05-00171-bif Doc 38 Filed 03/17/06 Entered 03/20/06 11:57:50 Desc Main
Document Page 12 of 14

13
UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
In re 	: 	Chapter 13
PAMELA SCOTT-GAGE 	:
Debtor 	: 	Bankruptcy No. 05-10069
PAMELA SCOTT-GAGE 	:
___________________________________
Plaintiff 	:
v.
:
JP MORGAN CHASE BANK
WMC MORTGAGE CORPORATION 	: 	Adversary No. 05-0171
GMAC MORTGAGE CORPORATION
and PLANTINUM FINANCIAL, INC. 	:
Defendant
.................................................
ORDER
.................................................
AND NOW, this 17th day of March 2006, upon motions of defendants JP
Morgan Chase Bank, WMC Mortgage Corporation and GMAC Mortgage Corporation for
summary judgment,
And for the reasons stated in the accompanying memorandum, it is hereby
ordered that:
1. Summary judgment is granted in favor of defendant GMAC Mortgage
Corporation and against the plaintiff on all counts;
2. Summary judgment is granted in favor of defendant JP Morgan Chase
Bank and against the plaintiff on Counts II and III;
Case 05-00171-bif Doc 38 Filed 03/17/06 Entered 03/20/06 11:57:50 Desc Main
Document Page 13 of 14

14
3. Summary judgment is granted in favor of defendant WMC Mortgage
Corporation and against the plaintiff on Counts II and III; and
4. The motions of defendants JP Morgan Chase Bank and WMC Mortgage
Corporation for summary judgment on Count I are deferred pending the ruling of the
Third Circuit Court of Appeals in the case of Strang v. Wells Fargo, Docket No. 05-
5154. Plaintiff’s counsel shall notify immediately all parties and this court upon his
receipt of the Third Circuit’s deposition of the Strang appeal.
____________________
BRUCE FOX
United States Bankruptcy Judge
copies to:
David A. Scholl, Esq.
Regional Bankruptcy Center of SE PA
Law Office of David A. Scholl
6 St Albans Avenue
Newtown Square, PA 19073
Barbara K. Hager, Esq.
Reed Smith LLP
2500 One Liberty Place
1650 Market Street
Philadelphia, PA 19103
Edward W. Kirn III, Esq.
Powers Kirn LLC
P.O. Box 1568
Mount Laurel, NJ 08054
Case 05-00171-bif Doc 38 Filed 03/17/06 Entered 03/20/06 11:57:50 Desc Main
Document Page 14 of 14