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08/18/87 David L. Hailes, v. Lincoln Service Corp.

August 18, 1987





Rules of the District of Columbia Circuit Court of Appeals may limit citation of unpublished opinions. Please refer to the Rules of the United States Court of Appeals for this Circuit.


Plaintiff-appellant Hailes owned and resided in a house located in Washington, D.C. He obtained a mortgage on the property on December 13, 1983, insured by the Federal Housing Administration . Defendant-appellee Lincoln Service Corporation ("Lincoln") subsequently purchased the mortgage and serviced it. The mortgage called for monthly payments of $540.82, *fn1 payable on the first day of each month, with a late charge of four percent if payment was not received by the fifteenth of the month. Hailes did not make timely payments for the months of November and December 1984, and January 1985. On January 8, 1985, Hailes' counsel proposed a payment schedule that would allow Hailes to become current by the end of February 1985. Under the schedule, Hailes tendered $800 with the January 8 letter, and agreed to tender $350 on January 18, $470 on or before February 4, and $600 by the end of February. *fn2 Lincoln received a payment of $350 on January 24, 1985. Hailes sent a payment of $950 on or about February 26, 1985, which Lincoln claims to have rejected and sent back to him. On or about March 19, 1985, Hailes tendered a payment of $541.16, which was also rejected and returned by Lincoln.

Lincoln notified Hailes that, unless he tendered the complete amount in arrears, it would foreclose on the property. Hailes maintained that he never received the aforementioned $950 and suggested that Lincoln might have endorsed the checks. The parties agreed that Hailes would take steps to clarify the status of the checks and that, if proof of endorsement could be obtained, Lincoln would credit his account in the amount of the checks so endorsed. Hailes never presented proof of endorsement of the checks by Lincoln to it, nor did he tender the amounts owing on the account. Lincoln then initiated foreclosure proceedings.

Hailes filed an action in the District Court. The complaint alleged that Lincoln had "wilfully and without cause refused to accept" Hailes' payments, and that, as a result, "Mr. Hailes has suffered and is suffering intense emotional upset, mental anguish, and physical stress." The complaint further alleged that "Lincoln is under a fiduciary duty to keep its records in an accurate manner," and that "[b]ecause Lincoln's records are in error, they are liable . . . for the tort of intentional infliction of emotional distress." Finally, the complaint alleged that Lincoln acted in bad faith by failing to maintain accurate records, by refusing to accept partial payments, and refusing to take reasonable steps to resolve the payments issues. The District Court granted the defendant's motion for summary judgment on all claims, and Hailes now appeals. We affirm the judgment of the District Court.

In reviewing the propriety of summary judgment, this court must determine if there are genuine issues of material fact in dispute. See FED. R CIV. P. 56(c). In this case, to the extent there are disputed facts, they are immaterial to the case, as the plaintiff-appellant has failed to establish a viable legal theory supporting his claims.

Hailes' claims center around three actions on the part of Lincoln: (1) Lincoln's refusal to accept partial mortgage payments; (2) Lincoln's failure to keep accurate records; and (3) Lincoln's refusal to take steps to investigate the status of the $950 payment tendered by Hailes in February 1985. In order to recover damages, Hailes must demonstrate that at least one of these actions occurred, that the action was unlawful, and that, as result, he was injured. Because Hailes has failed to establish one or more of the elements with respect to each of Lincoln's alleged actions, his claims fail.

Hailes advances two theories to support his view that Lincoln's admitted refusal to accept partial payments was unlawful. First, he asserts that, as a matter of District of Columbia law, Lincoln had to "mitigate damages" by accepting partial payments of monies owed. However, District of Columbia law clearly holds that a party to a contract need not accept a nonconforming tender. See Yasuna v. Miller, 399 A.2d 68, 72 (D.C. 1979). This is in accord with typical practice under negotiable instruments. See 10 C.J.S.2d § 447 at 982 (1938).

Hailes' second theory relies on federal regulations governing the actions of mortgagees holding FHA-insured mortgages. Hailes claims that Lincoln violated 24 C.F.R. § 203.556 (1986) by refusing to accept his partial payments, and that, as a result, he was injured. *fn3 Even if we assume that the violation of section 203.556 is actionable by a mortgagor, *fn4 it is clear that the section was not violated. Section 203.556 provides that a partial payment need not be accepted when "[t]he payment is less than the amount agreed to in a forbearance plan." Hailes' letter of January 8, 1985 clearly presents a forbearance plan. *fn5 The rejected payments were not in conformance with this plan. Accordingly, Lincoln acted in conformance with section 203.556 when it rejected the nonconforming payments, returned the payment and attached an explanation setting forth its reasons for doing so.

Hailes also claims that, by failing to maintain accurate records, Lincoln intentionally inflicted emotional distress on him. Under District of Columbia law, in order to make out an action for the tort of intentional infliction of emotional distress, the plaintiff must establish that the defendant's conduct is "beyond all the bounds of decency," "extreme and outrageous," or "without just cause or excuse." See Howard Univ. v. Best, 484 A.2d 958, 985 (D.C. 1984); Waldon v. Covington, 415 A.2d 1070, 176 (D.C. 1980). Hailes' claim here centers around Lincoln's failure to note Hailes' correct address. Hailes also claims that Lincoln, in fact, endorsed the $950 payment even though its records do not reflect any such endorsement. These allegations fall far short of establishing that Lincoln's behavior is any more than negligent and certainly fail to demonstrate "extreme and outrageous" conduct. Further, Hailes apparently received all communications mistakenly addressed, with the possible exception of Lincoln's letter returning the $950 payment. It is well established that bare allegations are not enough to withstand summary judgment. See Popham, Haik, Schnobrich, Kaufman & Doty, Ltd. v. Newcomb Secs. Co., 751 F.2d 1262, 1263 (D.C. Cir. 1985). That is all that Hailes has proffered.

Similarly, there is no evidence supporting Hailes' claim that Lincoln, in fact accepted his $950 payment. Absent some proof that the payments were accepted, either by proffering endorsed checks or relevant testimony, Hailes cannot prevail on the merits of his claim.

Finally, Hailes claims that Lincoln did not act in good faith when it refused to take steps to investigate the status of the $950 payment. However, it is undisputed that Hailes agreed to assume this duty. So, regardless of whether, as a matter of District of Columbia law, Lincoln might have been under a duty to investigate the status of the payment, this duty was shifted to Hailes by agreement between the parties. As of this date, it appears that Hailes has done little to investigate the matter himself.


This case was considered on the record on appeal from the United States District Court for the District of Columbia and on the briefs filed by the parties. The court has determined that the issues presented occasion no need for a published opinion. See D.C. Cir. Rule ...

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