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Gil Yoro Constantino and Gemma Guillermo Constantino v. U.S. Bank

September 23, 2011


The opinion of the court was delivered by: David Alan Ezra United States District Judge


Pursuant to Local Rule 7.2(d), the Court finds this matter suitable for disposition without a hearing. After reviewing the objections and the supporting and opposing memoranda, the Court ADOPTS the Magistrate Judge's Findings and Recommendations. (Doc. # 74.)


The instant action arises out of a note and mortgage that Plaintiffs Gil and Gemma Constantino ("Plaintiffs") executed in connection with the purchase of a home in 2006. ("FR," Doc. # 74, at 2.) Meridian Financial Network, Inc. ("Meridian") assigned the note and Mortgage to U.S. Bank, National Association as Trustee for the Structured Asset Investment Loan Trust ("U.S. Bank"). (Id.) Wells Fargo Bank, N.A., doing business as America's Servicing Company ("ASC"), became the servicing agent for U.S. Bank. (Id.) On or around January 21, 2009, ASC initiated non-judicial foreclosure proceedings against Plaintiffs. (Id.) On February 17, 2009, Plaintiffs filed their Complaint for Damages and Injunctive Relief, alleging, inter alia, Truth in Lending Act violations by Meridian. (Id. at 2--3; see also "Compl.," Doc. # 1.) On April 15, 2009, U.S. Bank filed a Counterclaim against Plaintiffs for foreclosure. (FR at 3; see also Doc. # 6.)

On December 16, 2009, ASC directly sent Plaintiffs a proposed loan modification agreement. ("Dec. 16 letter," Doc. # 65-3.) The loan modification agreement required a payment of $5,232.62 up front, which would "be applied toward the accrued delinquency and other fees and costs that cannot be included in the modification." (Id. at 1.) Per the modification, Plaintiffs' first principal and interest payment of $3,537.11 was due on March 1, 2010 at an interest rate of 4.750%. (Id.)

U.S. Bank claims that the terms set forth in the December 16, 2009 letter were offered by U.S. Bank, subject to final documentation and U.S. Bank approval, in a January 4, 2010 settlement conference in front of then-United States Magistrate Judge Leslie E. Kobayashi. (FR at 3.) Plaintiffs' counsel has stated that it does not recall whether the $5,232.62 up front payment was mentioned at the settlement conference. (Id. at 4.) Judge Kobayashi instructed U.S. Bank to convey its authorized settlement offer to Plaintiffs' counsel by January 11, 2010. (Id.)

In compliance with Judge Kobayashi's directive, on January 8, 2010, U.S. Bank's counsel sent an email to Plaintiffs' counsel which had attached a loan modification form. The email provided as follows:

[A]ttached is a form of loan modification agreement we've been authorized to offer to your clients. I believe it conforms to the loan modification terms I stated at the settlement conference and reflects the full extent of our settlement authority. Let us know if you have any questions or comments. (Doc. # 65-4.) The agreement was substantively the same as the loan modification agreement sent directly to Plaintiffs by ASC on December 16, 2009, except that it excluded the $5,232.62 up front payment. (FR at 4.) Plaintiffs did not accept that offer and there was no settlement at that time. ("Opp'n," Doc. # 80 at 3.)

On April 30, 2010, counsel for U.S. Bank sent an email to Plaintiffs' counsel as follows:

Wells Fargo hereby offers to settle the Constantino matter by entering into a loan modification on the terms set forth in the attachment (with performance dates appropriately updated). Please note that this proposed loan modification is on the same terms as proposed in my email to you of 1/8/10. In other words, it has not been increased to reflect your client's use of the funds/non payment over the last 15 weeks. In addition, Wells Fargo is willing to pay $2,500 as and for your client's attorney fees. (Opp'n, Ex. B., at 1.) Counsel for both parties subsequently clarified that the "offer is the same except that payment would begin at sometime in June or July." (Opp'n, Exs. C, D.) Once more, the $5,232.62 up front payment was not discussed. On May 10, 2010, Plaintiffs' counsel accepted the April 30, 2010 settlement offer as set forth in counsel's email correspondence. (Opp'n, Ex. E.)

On June 2, 2010, Plaintiffs' counsel wrote to U.S. Bank's counsel and stated that he was "still waiting to hear how you want to handle the mechanics of settlement. . . . As we discussed, the dates were incorrect on the most recent loan modification form." (Opp'n, Ex. G.)

By letter dated June 14, 2010, ACS sent a letter directly to Plaintiffs, which "confirmed our conversation where we agreed to modification of your mortgage loan" and enclosed a new loan modification agreement. (Opp'n, Ex. J.) By email dated June 18, 2010, counsel for U.S. Bank forwarded the loan modification agreement to counsel for Plaintiffs. (Doc. # 65-5.) The proposed modification required an up front payment of $5,066.67 (not $5,232.62 as stated in the December 16, 2009 letter) and decreased Plaintiffs' principal and interest payments to $3,531.47 at an interest rate of 4.375%. (Id. at 2.)

On July 9, 2010, Plaintiffs reached out to counsel for U.S. Bank and stated as follows:

I have tried to reach you . . . by telephone without success. I am following up on my conversation with Bruce and my email to him of July 1 [sic], 2010. Have you heard yet about the discrepancies we discussed? What is the next step in going forward with the settlement? My clients have been and are ready to proceed as we have agreed. (Opp'n, Ex. H.) Later that day Counsel for U.S. Bank responded stating that the "ball is in my court to follow up with client." (Opp'n, Ex. I.) On July 30, 2010, Plaintiffs' counsel reached out for further clarification on the proposed terms of the settlement. (Opp'n, Ex. K.)

On August 3, 2010, the parties attended a final pretrial conference in front of Judge Kobayashi. The settlement terms of the April 30, 2010 offer were tentatively placed on the record. (FR at 6.) Plaintiffs contend that when U.S. Bank's counsel stated the settlement terms before the Court, there was no mention of an up front payment. (Id.; Opp'n at 7.) U.S. Bank does not dispute that the up front payment was not discussed at the final pretrial conference. (FR at 6.)

On August 11, 2010, counsel for U.S. Bank stated in an email to counsel for Plaintiffs as follows:

[A]s we discussed, my client always intended that the settlement include the initial $5K contribution, as reflected by the loan modification cover letter to the Constantinos and corroborated by the alternative settlement it proposed in June with the same contribution.

My client contends that your client understood this as well from having received the cover letter and that our agreement not including this term is a result of mutual mistake. (Opp'n, Ex. L.) Counsel for Plaintiffs responded stating that U.S. Bank's position is simply not correct. You made an offer and we accepted, and finally (after much delay) we placed the settlement on the record with no mention of any $5000 'contribution'. Neither I nor my clients were aware of any additional $5000 payment when we accepted your offer.

In addition, the $2500.00 in attorneys fees was based on a prompt and normal completion of the settlement which has not occurred due to ...

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