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OneWest Bank, F.S.B. v. Feeney

Court of Chancery of Delaware

June 27, 2013

ONEWEST BANK, F.S.B., Plaintiff,
v.
DONALD L. FEENEY, JR. and, LAVETTE SHAWANN FEENEY, Husband and Wife, and PATRICIA FEENEY, Defendants.

Date Submitted: March 20, 2013

Draft Report: June 19, 2013

Corrected Final Report: November 5, 2013

Seth L. Thompson, Esquire of Sergovic, Carmean & Weidman, P.A., Georgetown, Delaware; Attorneys for Plaintiff.

Dean A. Campbell, Esquire of The Law Office of Dean A. Campbell, LLC, Georgetown, Delaware; Attorneys for Defendants.

MASTER'S REPORT (MOTION TO VACATE DEFAULT JUDGMENT)

Abigail M. LeGrow Master in Chancery

INTRODUCTION

Before me is a motion by the defendants, Donald L. Feeney, Jr., LaVette Shawann Feeney, and Patricia Feeney, to vacate the default judgment this Court entered in favor of the plaintiff, OneWest Bank, F.S.B., on December 21, 2011. The issue is whether the defendants are entitled to reopen the default judgment that was entered after they failed to respond to a complaint filed by OneWest in June 2011 that sought, among other things, reformation of a defective mortgage between OneWest and the defendants. The defendants have established excusable neglect for their failure to answer the complaint and appear before the Court for a hearing on the motion for the default judgment, but have failed to present a meritorious defense to the action that would allow for the possibility of a different outcome to the litigation if the matter was heard on its merits. I therefore recommend that the Court deny the motion to vacate the default judgment.

FACTUAL BACKGROUND

The following facts are derived from the parties' papers filed with and in response to the motion, including all attached exhibits, as well as the underlying complaint, filed in this Court by OneWest on June 13, 2011. Donald and LaVette Feeney (also referred to as "the Feeneys" throughout this report) were married in February 1997 and were husband and wife for the entire period at issue. Patricia Feeney is Donald's mother.[1] On October 25, 2005, Patricia executed a deed conveying certain lands located at 28349 Warwick Road in Millsboro, Delaware (the "Property") to Donald and LaVette. The deed bore the names of Donald and LaVette as owners of the Property. According to the defendants, on March 1, 2006, Donald and Patricia submitted loan application paperwork for a conventional 30-year, fixed rate mortgage to IndyMac Bank, F.S.B. ("IndyMac"). The defendants also assert that with their application, they submitted a signed Truth-in-Lending Disclosure Statement that indicated that the loan, which had a construction loan component, would be a fixed rate, not an adjustable rate, loan. IndyMac issued them a one year adjustable rate mortgage loan for $397, 000.[2] The mortgage note associated with that loan ("the Mortgage") incorrectly listed Donald and Patricia as joint tenants and owners of the Property. That is, Donald and Patricia were listed as the mortgagors, while the deed listed Donald and LaVette as the owners of the Property.

Between 2006 and 2011, Donald and LaVette, with the help of an attorney who also had assisted them with the settlement of the deed conveying the Property, attempted several loan modifications with their lender. Ultimately their mortgage modification negotiations failed, and Donald and LaVette filed for Chapter 7 bankruptcy protection. On August 24, 2010, the United States Bankruptcy Court for the District of Delaware discharged certain of their debts.[3] In March 2010, the Mortgage was assigned to OneWest Bank, F.S.B., ("OneWest") when IndyMac was closed by the Office of Thrift Supervision and the Federal Deposit Insurance Corporation (the "FDIC") was named its conservator.

i. The Default Judgment

On June 13, 2011, OneWest filed in this Court a verified complaint against the defendants in which OneWest sought (i) reformation of the Mortgage such that it would list Donald and LaVette as the mortgagors, (ii) a constructive trust on the Property, and (iii) damages for unjust enrichment against Donald and LaVette, who according to the complaint, had defaulted on the Mortgage. The defendants did not file any response to the complaint, and on September 22, 2011, OneWest moved for default judgment under Court of Chancery Rule 55. Neither the defendants nor any attorney acting in their stead appeared at the default judgment hearing. On December 21, 2011, following the hearing on the motion for default judgment, this Court entered a default judgment against the defendants and in favor of ...


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