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Bank of New York Mellon v. Hegedus

Superior Court of Delaware

December 18, 2017

Bank of New York Mellon Plaintiff,
James A. Hegedus and Virginia E. Hegedus Defendants.

          Submitted: September 28, 2017

          Daniel T. Conway, Esq. ORLANS PC, 512 East Market Street, Georgetown, Delaware 19947, Attorney for the Plaintiff.

          James A. Hegedus and Virginia E. Hegedus, PO Box 2325, Staunton, Virginia 24402, pro se, Defendants.


          M. Jane Brady Judge



         Before the Court is a mortgage foreclosure action, brought by the Bank of New York Mellon ("Plaintiff) against James A. Hegedus and Virginia E. Hegedus, ("Defendants"). Defendants, residents of Virginia, purchased a home in Delaware, subject to a mortgage.[1] This matter was initially filed in December 2015. Numerous issues were raised by Defendants prior to trial, including whether the Plaintiff was the real party in interest and had standing, whether there was a default, and if so, which party defaulted, discovery disputes and a Motion to Quiet Title. There was a brief period when the matter was placed on the dormant docket, but then removed at Defendants' request. The matter was heard in a nonjury trial before this Judge, beginning March 9, 2017. After hearing argument and some testimony, the Court recessed to allow the parties to determine if some mutual, amicable resolution could be reached. Those efforts were unsuccessful, and the Court reconvened on August 31, 2017 and concluded testimony. The Court permitted post-trial submissions by both parties. The final submission was received on September 28, 2017. This is the Court's decision.


         The Defendants contend they did not default on their obligation under the mortgage.[2] They claim they had an agreement with the County to pay their taxes in several installments and, therefore, were not delinquent in paying their taxes.[3]Defendants challenge the authority of the Plaintiff to bring this action.[4] They assert that Plaintiff never paid any monies on behalf of Defendants, and that no escrow was established.[5] They contend the mortgage attached to the Complaint is a "pretender mortgage" and that there have been violations of their due process rights and the Fair Debt Collections Practices Act.[6] They further claim they never received the demand letter, and that the person who signed the Affidavit saying it was mailed worked for Nationstar, not the "alleged Plaintiff, " and therefore the letter did not meet the legal requirements, and that there is no record that they did receive the demand letter.[7] They also allege they were not informed of the acceleration of the loan.[8] Finally, Defendants claim they are entitled to an Order quieting title in this matter and discharge of their remaining debt because their loan was sold, not recorded, and therefore the mortgage is "nonexistent" and "unenforceable."[9]

         Plaintiff contends that Plaintiff is the proper party in interest and has standing to bring this action. Plaintiff asserts that Defendants did not pay their property taxes timely and that the original loan documents permit the establishment of an escrow account if that circumstance occurred.[10] Plaintiff contends the account was placed in default when the Defendants disregarded the obligation to pay the escrow amounts, and this action is properly brought.[11]


         The Court has reviewed the entirety of the record, including notes taken at trial and all submissions by the parties, pre- and post-trial. The Court makes the following findings of fact.

         The original mortgage at issue in this matter was executed on June 14, 2006 between Defendants and First Horizon Home Loan Corporation as lender/mortgagee, with MERS listed as nominee for the lender. Included in the terms of the mortgage, the lender agreed to waive any requirement that Defendants place monies in escrow for property taxes.[12] On August 15, 2011, Nationstar sent a welcome letter to Defendants notifying them that Nationstar would be serving the loan for MetLife, a sub-server for First Horizon Home Loans Corporation. On September 13, 2013, the mortgage was assigned from MERS to Bank of New York Mellon ("Plaintiff). The assignment retained Nationstar as the mortgage servicer.

         On March 8, 2013, Nationstar sent a letter titled "URGENT" to Defendants advising they had conducted an examination of tax records, and found that a portion of the Sussex County taxes, which had been due on September 30, 2012, in the amount of $140.17, had not been paid.[13] The letter further advised, "Failure to pay your taxes prior to their delinquency date constitutes a default under the terms of your mortgage or deed of trust and places your property in jeopardy. As such, pursuant to the Waiver of Lender's Right to Escrow for Taxes and Insurance you executed in connection with your loan, Nationstar Mortgage may require that you maintain an escrow/impound account for the payment of future taxes and insurance."[14] On April 11, 2013, Nationstar notified Defendants again of the delinquency and asked, if the taxes had been paid, to send proof of payment. The same correspondence put Defendants on notice that "In the event you are unable to provide this office with proof of payment within 15 days, Nationstar Mortgage may elect, without further notice, to advance payment of delinquent taxes, assessment charges and penalties and interest as provided in your loan documents. Furthermore, Nationstar Mortgage will establish an irrevocable escrow account for you, to prevent future tax defaults and your monthly payment amount will be adjusted accordingly."[15]

         On July 2, 2013, unaware that Defendants had sent a check to Sussex County for the taxes on July 1, 2013, Nationstar sent a check to Sussex County in the amount of the delinquent taxes. The County credited Nationstar's payment first, and the payment sent by Defendants was returned to them. On July 31, 2013, Defendants sent a check in the amount of $ 140.17 to Nationstar in reimbursement. Nationstar placed the amount in what they termed a "suspends" account.

         In subsequent months, Defendants sent payments to Nationstar in the amount of the original mortgage payment without escrow included. Nationstar, however, had revoked the waiver of escrow, and subsequent statements to Defendants, beginning July 16, 2013, reflected a negative escrow balance.[16] On the payment dated August 1, 2013, Defendants wrote on the back of the check, "no escrow account and no escrow due."[17] On August 30, 2013, apparently in response to the note on the back of the August payment, Nationstar sent a letter to Defendants stating that company was not going to remove the requirement there be an escrow account because the taxes had been delinquent.[18] On September 30, 2013, the Sussex County taxes were again due. On September 26, 2013, Defendants paid the County $967.14, the balance due after crediting the $140.17 they had previously paid ...

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