Davis v. G.N. Mortgage Corporation

396 F.3d 869 (2005)

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Nature of the Case

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Facts

P obtained a $288,000 adjustable rate mortgage from D. The only other party present at the loan closing was Bogdanovich, the closing agent for TICOR Title Insurance Company, which was the title company authorized by D to conclude the transaction. P was presented with two stacks of paper, each purportedly consisting of 24 documents and totaling 43 pages. Ps admit that they failed to read or compare the two sets of documents thoroughly at the time of the closing. They allege that Bogdanovich told them that the stacks were identical in content and accurately represented the agreement between themselves and D, including a provision setting forth a two-year prepayment penalty period. D eventually sold the note to Countrywide. When ready to pay off in two years, Ps were surprised to learn they had a 5-year prepayment penalty of six months interest instead of the two-year provision. The parties agree that D had initially proposed a three-year prepayment penalty period. The loan file contains a document entitled 'Conditional Loan Approval,' containing notation of a three-year prepayment penalty period. That document, however, is not signed. Upon reviewing the unsigned copy of the mortgage contract that they retained from the closing, P discovered two documents which they had not previously read entitled 'Prepayment Penalty Note Addendum,' both of which had been drafted D. The riders were identical except that one provided for a 'twenty-four-month penalty period,' while the other provided for a 'sixty-month penalty period.' The one they signed at the closing was of the 'sixty-month' species, a fact which they do not dispute. Ps claimed they signed every document in the stack and must have signed both versions. P paid off the 30-year in less than three years later by refinancing at a much lower rate and were assessed over $12,000 in penalties pursuant to the terms of a five-year prepayment penalty rider included in the mortgage document. Ps sued Ds, alleging that the prepayment penalty agreement was fraudulently obtained, that enforcement of the penalty constituted a breach of contract and that the penalty violated state consumer fraud laws. P claims that they had agreed to a twenty-four-month prepayment rider, but D had fraudulently induced them into signing one that provided for a penalty if the loan was paid before sixty months had elapsed. P was unable to produce evidence of a signed two-year agreement. Ds motioned for summary judgment, and it was granted. P appealed.