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Northern Regal Homes, Inc. v. RoundPoint Mortgage Servicing Corp.

United States District Court, D. Utah

June 9, 2017

NORTHERN REGAL HOMES, INC. and RICK WILLIAMS, Plaintiffs,
v.
ROUNDPOINT MORTGAGE SERVICING CORPORATION and NATIONSTAR, INC., Defendants.

          MEMORANDUM DECISION AND ORDER

          Jill N. Parrish United States District Court Judge.

         District Judge Jill N. Parrish Plaintiffs Northern Regal Homes (“Regal”) and Rick Williams (collectively “Borrowers”) sued RoundPoint Mortgage Servicing Corporation (“RoundPoint”) for breach of contract.[1] In its December 20, 2016 Memorandum Decision, the court held that RoundPoint was liable for breaching a mortgage loan agreement between the parties as a matter of law. Specifically, the court held that RoundPoint breached its contractual obligations by (1) refusing to accept and returning Borrowers' payments, (2) changing the locks and disabling the garage door openers to Borrowers' Property, thereby depriving Borrowers of their right to the Property, and (3) exercising rights related to an event of default when no such event had taken place. The court held a two-day bench trial on April 26 and 27, 2017, on the appropriate measure and amount of damages stemming from RoundPoint's breach of contract. After hearing the evidence and the parties' arguments, the court makes the following findings of fact and conclusions of law.

         FINDINGS OF FACT

         In November 2006, Regal and Mr. Williams entered into a construction loan agreement with Barnes Banking Company (“Barnes”) for the purpose of constructing a single-family residence located at 4554 West 5750 South in Hooper, Utah[2] (the “Property”). Borrowers executed a promissory note (the “Note”) for the principal amount of $295, 600.00 that had a maturity date of August 15, 2007. As security for the Note, Borrowers executed and recorded with the Weber County Recorder's Office a construction deed of trust in favor of Barnes (the “Deed of Trust”), encumbering the Property.[3] In May 2007, Borrowers and Barnes entered into a Change in Terms Agreement. The Change in Terms Agreement converted the construction loan to a five year mortgage loan with a maturity date of January 10, 2014. Under the Change in Terms Agreement, the monthly payment due was $2, 054.71.

         At the beginning of 2010, Barnes ceased its operations. The Federal Deposit Insurance Corporation, as receiver for Barnes, assigned the Loan and its related benefits and obligations to a third party. Servicing of the Loan was transferred to RoundPoint in February 2011 and the Loan was eventually sold to RoundPoint.

         Although Borrowers had timely made all monthly payments to that point, RoundPoint sent a letter to Borrowers on October 13, 2011, informing them that the Loan was in default. Borrowers responded by letter dated October 25, 2011, explaining to RoundPoint that Borrowers had not missed any payments and disputing the alleged default. Borrowers proceeded to send their November 2011 payment by check to RoundPoint only to have the payment rejected and the check returned. In December 2011, Borrowers again tendered payment to RoundPoint (enclosing checks for both the November and December payments), only to have their payments again rejected and the checks returned to them. Borrowers again sent payment to RoundPoint in January (enclosing checks for November, December, and January) only to have RoundPoint reject the payments and return the checks to them once again. Borrowers continued this same practice of sending the current month's payment, as well as the previously rejected payments, over the subsequent few months. In total, RoundPoint received and then rejected and returned Borrowers' payments for six months from November 2011 to April 2012. After RoundPoint rejected these six consecutive payments, Borrowers ceased making payments on the Loan. Despite numerous attempts by Borrowers to get RoundPoint to correct its error regarding the payment history on the Loan, RoundPoint pursued the erroneous default, twice initiating foreclosure proceedings on the Property, but cancelling those proceedings before foreclosure had been completed.

         During this time, the Property was occupied by Ben Rose and his family. Mr. Rose responded to a classified advertisement posted online that advertised the Property as available to lease with an option to buy. Borrowers and Mr. Rose negotiated a two-year lease of the Property with rent payments of $1, 950.00 per month. Borrowers and Mr. Rose contemplated that, at the conclusion of the two-year term, Mr. Rose would discuss with Borrowers the possibility of exercising his option to purchase the home. Although Mr. Rose inquired with Borrowers near the end of the two-year term about purchasing the Property, Borrowers could not negotiate the sale of the property at that time due to the alleged default and ongoing dispute with RoundPoint. Eventually Mr. Rose and his family found another home to purchase that included a home warranty and other options that Borrowers were unable to offer. Mr. Rose thereafter declined to exercise his purchase option and the Roses moved out of the Property on or about June 12, 2012.

         RoundPoint took possession of the Property from Borrowers on June 24, 2012, when it changed the locks and disabled the garage door opener. RoundPoint has remained in possession of the Property continuously since that time, but Regal remains the record owner.

         CONCLUSIONS OF LAW

         I. Legal Standard for Contract Damages

         The purpose of damages in a breach of contract action is “to place the aggrieved party in the same economic position the party would have been in if the contract was not breached.[4]Eleopulos v. McFarland & Hullinger, LLC, 145 P.3d 1157, 1159 (Utah Ct. App. 2006) (citing Mahmood v. Ross, 990 P.2d 933, 937 (Utah 1999)). See also Anesthesiologists Assoc. v. St. Benedict's Hosp., 884 P.2d 1236, 1238 (Utah 1994) (“Damages awarded for breach of contract should place the non[-]breaching party in as good a position as if the contract had been performed.” (internal quotation marks and citation omitted)); Trans-W. Petrol., Inc. v. U.S. Gypsum Co., 379 P.3d 1200, 1206 (Utah 2016) (“Utah law provides the injured party in a breach of contract action with ‘a right to damages based upon his expectation interest.'” (quoting TruGreen Cos., L.L.C. v. Mower Bros., Inc., 199 P.3d 929, 931 (Utah 2014))). Two types of damages accomplish that purpose: “general damages, which flow naturally from the breach, and consequential damages, which, while not an [inevitable] result of breach, were reasonably foreseeable by the parties at the time the contract was entered into.” Mahmood, 990 P.2d at 937.

         General damages are “‘implied in law' because they are ‘the probable and necessary result of[ ] the injury.'” Trans-W. Petrol., 379 P.3d at 1206-07 (quoting Cohn v. J.C. Penney Co., 537 P.2d 306, 307-08 (Utah 1975)). Consequential damages “‘are the natural, but not the necessary, result of an injury . . . and thus are not implied by law.'” Id. See also Mahmood, 990 P.2d at 937 (“[C]onsequential damages, which, while not an [inevitable] result of breach, were reasonably foreseeable by the parties at the time the contract was entered into.”). They are measured “not by the value of the promised performance alone but by the gains such performance could produce for collateral reasons, or the loss that is produced by the absence of such performance.” Id. at 1204. “To recover consequential damages, an injured ‘party must prove (1) that consequential damages were caused by the contract breach; (2) that consequential damages ought to be allowed because they were foreseeable at the time the parties contracted; and (3) the amount of consequential damages within a reasonable certainty.'” Trans-W. Petrol., 379 P.3d at 1207 (quoting Mahmood, 990 P.2d at 938).

         The fact of damages resulting from a breach of contract must be proven with reasonable certainty. See Atkin, Wright & Miles v. Mtn. States Tel. & Tel. Co., 709 P.2d 330, 336 (Utah 1985). But “the standard for determining the amount of damages is not so exacting as the standard for proving the fact of damages . . . .” Id. The amount of damages must be supported by “evidence that rises above speculation and provides a reasonable, even though not necessarily precise, estimate of damages.” Id. Finally, “[i]f a continuing breach . . . [is] a ...


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