$21,802,092.26 (million) Civil Conspiracy Trial (#:07-10416 KJC) set for 10-20-10 at US Bankruptcy Court of Delaware, http://bit.ly/T-2010
IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
In re: : Chapter 11
:
NEW CENTURY TRS HOLDINGS, : Case No. 07-10416 (KJC)
INC., a Delaware corporation, et al., 1 :
: Jointly Administered
Debtors. :
JOINT PRE-TRIAL MEMORANDUM CONCERNING
CLAIM OF MR. AUGUSTIN AND THE DEBTORS’
EIGHTEENTH OMNIBUS OBJECTIONS TO CLAIMS
Consistent with this Court’s General Order regarding pre-trial procedures for matters set for trial, The New Century Liquidating Trust (the “Trust”) and Pierre Augustin, who identifies himself in this proceeding as Private Attorney General, Ex Rel (“Mr. Augustin”), respectfully submit this Joint Pre-Trial Memorandum. Counsel for the Trust circulated a draft of this memorandum to Mr. Augustin, who is representing himself in this matter, on October 8, 2010. On October 14, 2010, Mr. Augustin provided counsel for the Trust with his comments to the draft. Thereafter, the parties have worked together to arrive at this mutually agreeable form of memorandum.
BASIS OF JURISDICTION
This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334. Venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(B).
By filing a proof of claim with this Court, Mr. Augustin submitted himself to the equitable jurisdiction of this Court to determine his asserted claim against New Century Mortgage Corporation (“NCMC”), one of the above-captioned debtors (collectively, the “Debtors”).
STATEMENT OF UNCONTESTED FACTS
General Case Background
On April 2, 2007 (the “Petition Date”), the above-captioned debtors (collectively, the “Debtors”) (with the exception of New Century Warehouse Corporation) filed voluntary petitions for relief under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) with this Court. Until the Second Amended Joint Chapter 11 Plan of the Debtors and the Official Committee of Unsecured Creditors Dated as of April 23, 2008 (the “Original Plan”)2 became effective on August 1, 2008, the Debtors continued in the management and operation of their businesses pursuant to Bankruptcy Code sections 1107 and 1108.
On April 23, 2008, the Debtors filed the Original Plan [D.I. 6412].3
On July 15, 2008, the Court entered the order confirming the Original Plan [D.I. 8596] (the “Original Confirmation Order”). The order amending the Original Confirmation Order was entered on July 22, 2008.
On August 1, 2008 (the “Original Effective Date”), the Original Plan became effective. Pursuant to the terms of the Original Plan, on the Original Effective Date the New Century Liquidating Trust Agreement (the “Trust Agreement”) was executed, thereby creating the Trust and appointing Alan M. Jacobs as Trustee of the Trust. On the Original Effective Date, among other things, all Assets of the Debtors (excluding Access Lending Assets but including Access Lending Interests) were distributed to the Trust and all of the remaining members of the Debtors ’ Board of Directors and Officers ceased to serve in those capacities by operation of the Original Confirmation Order.
On August 4, 2008, the Notice of (I) Entry of Order Confirming Second Amended Joint Chapter 11 Plan of Liquidation of the Debtors and the Official Committee of Unsecured Creditors Dated as of April 23, 2008 (II) Effective Date and (III) Bar Dates for Administrative Claims, Professional Fee Claims, Subordination Statements, and Rejection Damage Claims [D.I. 8705] (the “Notice of Effective Date”) was filed.
On June 16, 2009, the United States District Court for the District of Delaware (the “District Court”) issued a Memorandum Opinion and an order reversing the Original Confirmation Order (together, the “Order Reversing Confirmation”).
On September 30, 2009, the Trustee filed the Modified Plan [D.I. 9905].
On November 20, 2009, the Court entered an order confirming the Modified Plan (the “Modified Confirmation Order”) [D.I. 9957].
On December 1, 2009 (the “Modified Effective Date”), the Modified Plan became effective. On the Modified Effective Date, the Modified Plan, inter alia, (a) confirmed that all actions taken by the Trustee subsequent to the Original Effective Date were valid and binding, (b) adopted, ratified and confirmed the formation of the Trust as of the Original Effective Date, (c) adopted, ratified and confirmed the Liquidating Trust Agreement as of the Original Effective Date, and (d) adopted, ratified and confirmed the appointment of Alan M. Jacobs as Trustee as of the Original Effective Date.
Pursuant to Section 3.3. of the Trust Agreement and the Modified Confirmation Order, as of the Original Effective Date, the Trust reserved the exclusive right to object to the allowance of any claim, and the Trustee was given the authority and power to file objections regarding the allowance and disallowance of claims.
Facts Specific To Procedural Posture
On or about January 8, 2008, Mr. Augustin filed two proofs of claim against NCMC, claim numbers 3781 and 3759, which were identical. Each proof of claim asserted a claim amount of $700,264.80 plus punitive damages in an unknown amount on the basis of civil conspiracy of mortgage fraud.
On February 22, 2008, the Debtors filed the Debtors’ Fifteenth Omnibus Objection to Claims: Non-Substantive Objection Pursuant to 11 U.S.C. Sections 502, 503, 506 and 507, Fed. R. Bankr. P. 3007 and 9014, and Del. Bankr. L.R. 3007-1 to Certain (A) Amended and Superseded Claims; (B) Duplicate Claims; (C) Late Filed Claims; and (D) No Supporting Documentation Claims [D.I. 5024] (the “Fifteenth Omnibus Objection”). The Fifteenth Omnibus Objection sought to expunge, among other claims, claims that were duplicative of other claims filed against the Debtors. Claim number 3781 (the “Duplicate Claim”) filed by Mr. Augustin was one of the claims that the Debtors sought to expunge in the Fifteenth Omnibus Objection.
On March 27, 2008, the Debtors filed the Debtors’ Eighteenth Omnibus Objection: Substantive Objection Pursuant to 11 U.S.C. Sections 502, 503, 506 and 507, Bankruptcy Rules 3007 and 9014, and Local Rule 3007-1 to Certain (A) Books and Records Claims; (B) Insufficient Documentation Claims; (C) Multiple-Debtor Duplicate Claims; and (D) Reduced and/or Reclassified Claims [D.I. 5537] (the “Eighteenth Omnibus Objection”). The Eighteenth Omnibus Objection sought to expunge, among other claims, claims that were not reflected in the Debtors’ books and records and that had insufficient documentation to support them. Claim number 3759 (the “Remaining Claim”) filed by Mr. Augustin was one of the claims that the Debtors sought to expunge in the Eighteenth Omnibus Objection.
Once the Original Plan became effective, the Trust assumed prosecution of the Debtors’ unresolved claim objections, including the Fifteenth Omnibus Objection and the Eighteenth Omnibus Objection.
Mr. Augustin consented to the relief requested in the Fifteenth Omnibus Objection as it relates to the Duplicate Claim (i.e., expunging the Duplicate Claim).
On January 21, 2009, the Court heard argument of counsel for the Trust and Mr. Augustin regarding the priority of the Remaining Claim. The Court determined that there was no legal basis for the asserted priority of the Remaining Claim.
On January 29, 2009, the Court entered an order expunging the Duplicate Claim, reclassifying the Remaining Claim as a general unsecured claim, and expressly providing that nothing in the order is meant to preclude any claim of rescission that Mr. Augustin may have [D.I. 9323]. Mr. Augustin has not filed anything to amend the Remaining Claim. Tr. 12:14-17.4
Accordingly, the Remaining Claim, claim no. 3759, asserting a claim amount of $700,264.80 plus punitive damages in an unknown amount on the basis of civil conspiracy of mortgage fraud, is the focus of the dispute presently before the Court.
Discovery Schedule and Disputes
On September 4, 2008, the Court issued a scheduling order regarding the objections to the Mr. Augustin’s claims [D.I. 8905] (the “Scheduling Order”). Fact discovery was scheduled to close on December 19, 2008.
On February 11, 2009, Mr. Augustin filed his Motion to Compel New Century Liquidating Trust to Produce Original Front & Back of Mortgage Note [D.I. 9332] (“Motion to Compel Production of Original Note”) and the Trust filed its objection to Motion to Compel Production of Original Note on March 23, 2009 [D.I. 9403]. The Trust subsequently represented to the Court that it is not in possession of the original mortgage note, as the note was sold and the original note was given to the subsequent mortgage holder.
On March 10, 2009, the Trust filed its Motion to Compel Discovery from Pierre Augustin and Extend the Discovery Deadline [D.I. 9373] (the “Trust Motion to Compel”).
On March 23, 2009, Mr. Augustin filed his (I) Petition to Withdraw All Submitted Answers to Request for Admission Pending the Outcome of Consumer Creditor’s Private (Non-Judicial) Administrative Process Per UCC and Discoveries of Non-Parties Party Witnesses & Judicial Cognizance of Rescission of Signature Except on the Promissory Note and (II) Objections & Rebuttal to Motion to Compel [D.I. 9426].
On March 26, 2009, the Court held a hearing regarding, inter alia, the Motion to Compel Production of Original Note. The Court denied the Motion to Compel Production of Original Note and ordered counsel for the Trust to submit a form of order denying the motion.
On April 6, 2009, Mr. Augustin filed his Emergency Petition for Reconsideration of Denying in Part the Request for Providing Original Note with Wet Ink Signature for Authentic Proof [D.I. 9575].
On April 14, 2009, the Court entered its Order Regarding (1) Motion of Pierre Augustin to Compel New Century Liquidating Trust to Produce Original Front & Back of Mortgage Note, (2) Motion of the New Century Liquidating Trust to Compel Discovery From Pierre Augustin and Extend Discovery Deadlines, and (3) Amended Scheduling Order [D.I. 9587] (the “First Discovery Ruling”), which, among other things, denied the Motion to Compel Production of Original Note and revised the scheduling order, allowing certain additional discovery by Mr. Augustin to be answered by the Trust on May 13, 2009.
On April 24, 2009, Mr. Augustin simultaneously filed a (i) Notice of Appeal, regarding the First Discovery Ruling [D.I. 9602] (the “First Discovery Appeal”), and (ii) Petition for A Stay of Discovery Matters Pending the Outcome of an Emergency Writ to the Higher Courts [D.I. 9603] (the “Petition to Stay Discovery”).
On April 30, 2009, the Clerk of this Court filed the Notice of Hearing on the Petition For A Stay Of Discovery Matters [D.I. 9612].
The Trust served its responses to Mr. Augustin’s additional discovery requests (the “Trust’s Discovery Responses”) on May 13, 2009. On that same date, the Trust filed a Notice of Service indicating its service of the Trust’s Discovery Responses [D.I. 9640].
On May 20, 2009, the Trust filed the Objection Of The New Century Liquidating Trust To Petition For A Stay Of Discovery Matters Pending The Outcome Of An Emergency Writ To The Higher Courts [D.I. 9650].
On May 27, 2009, the Court held a hearing regarding, inter alia, Mr. Augustin’s Petition to Stay Discovery. Subsequent to the hearing, on May 29, 2009, a Notice of Docketing Record on Appeal to the District Court was filed [D.I. 9668].
The District Court assigned Case No. 09-378-SLR to the First Discovery Appeal.
On June 24, 2009, the Trust filed the Appellees’ Motion to Dismiss the Appeal (the “Motion to Dismiss First Discovery Appeal”) [D.C. D.I. 3]5 and brief in support thereof [D.C. D.I. 4]. The District Court granted the Motion to Dismiss First Discovery Appeal by order entered on March 24, 2010 [D.C. D.I. 10].
On or about July 17, 2009, Pierre Augustin filed his Emergency Request to Obtain Information From the Compel Order for the Trust to Answer the Questions Except the Production of the Promissory Note [D.I. 9736] (“July Motion to Compel”).
On July 24, 2009, the Trust filed its Motion of New Century Liquidating Trust for an Order Extending Time to Complete Deposition Discovery Concerning Claim Dispute With Pierre Augustin [D.I. 9749] (“Trust Motion to Extend Time”).
On or about August 3, 2009, Mr. Augustin filed his Objections to Trust Discovery Responses & Emergency Motion to Compel Revised Answers & Production of Documents to Discovery Questions & Judicial Notice of Modern Money Mechanics Publication [D.I. 9757] (“August Motion to Compel”). The August Motion to Compel also included Objections to Notice of Deposition (FRCP 30), which was effectively a motion to quash to the Trust’s notices of deposition. The Trust viewed the July Motion to Compel as moot, as the August Motion to Compel acknowledged that Mr. Augustin had received the Trust’s Discovery Responses.
On August 18, 2009, the Trust filed its Motion of New Century Liquidating Trust to Compel Pierre Augustin to Respond to Certain Discovery Requests [D.I. 9835] (“Trust Motion to Compel”). On that same date, the Trust objected to the August Motion to Compel [D.I. 9837) and responded to the Objections to Notice of Deposition [D.I. 9838].
On August 21, 2009, the Court held a telephonic hearing to address the various discovery disputes by and among the Trust and Mr. Augustin. At the hearing, the Court adjudicated the July Motion to Compel, the August Motion to Compel, the Trust Motion to Extend Time, and the Trust Motion to Compel.
At the conclusion of the August 21, 2009 telephonic hearing, the Court directed counsel for the Trust to submit a proposed form of order under certification of counsel denying the July Motion to Compel and the August Motion to Compel.
On August 21, 2009, the Court entered an order granting the relief requested in the Trust Motion to Compel [D.I. 9840] and an order granting the relief requested in the Trust Motion to Extend Time [D.I. 9841].
On August 31, 2009, the Court entered an order [D.I. 9867] (the “Second Discovery Ruling”) denying the July Motion to Compel and the August Motion to Compel. Additionally, the Second Discovery Ruling stated that “to the extent that the August Motion to Compel included any additional discovery requests from Mr. Augustin directed to the Trust, such additional discovery requests are hereby quashed as untimely.” And finally, the Second Discovery Ruling required the Trust to re-serve the Trust’s Discovery Responses upon Mr. Augustin.
On September 9, 2009, Mr. Augustin filed an Emergency Notice of Appeal regarding the Second Discovery Ruling (the “Second Discovery Appeal”) [D.I. 9875].
The District Court assigned Case No. 09-732-SLR to the Second Discovery Appeal.
On November 25, 2009, the Trust filed the Appellee’s Motion to Dismiss the Appeal (the “Motion to Dismiss Second Discovery Appeal”) [D.C. D.I. 5] and brief in support thereof [D.C. D.I. 6]. The District Court granted the Motion to Dismiss Second Discovery Appeal by order entered on July 15, 2010 [D.C. D.I. 11].
Facts Specific To Claim Dispute
Mr. Augustin has a Bachelor’s of Science degree in political science, business, and economics from Salem State College. Tr. 10:5-7. He received a Masters in Public Administration from Suffolk University and, in 1999, a Master’s in Business Administration from the University of Lowell. Tr. 10:13-17; Tr. 207:6-7.
On or about May 17, 2002, Danversbank (f/k/a Danvers Savings Bank) issued an alleged small business loan to Mr. Augustin’s business, in the approximate amount of $55,000 (the alleged “Danvers Loan”), to enable Mr. Augustin’s business to export products to Haiti. Complaint (defined below), ¶ 37 and 43; Tr. 199:1 – 201:6. On May 17, 2002, Mr. Augustin executed an Unconditional Personal Guaranty in connection with the alleged Danvers Loan. Complaint, Exhibit 7.
Mr. Augustin asserts that due to the political and economic climate in Haiti, the retail operations of his business in Haiti suffered, rendering his business unable to make payments due under the alleged Danvers Loan, ultimately resulting in Mr. Augustin personally filing for chapter 7 bankruptcy to protect his home and to eliminate all unsecured debts. Complaint, ¶ 45-48.
On December 18, 2003, Ms. Ngampa executed a Massachusetts Mortgage Broker Disclosure with Allied Home Mortgage Capital Corp. (“Allied”), that states that Allied is not her agent. Further, on December 18, 2003, Ms. Ngampa executed a Massachusetts High Cost Loan Application Disclosure provided by Allied, that states: “The alleged loan which will be offered to you is not necessarily the least expensive alleged loan available to you and you are advised to shop around to determine competitive interest rates, points, and other fees and charges.”
On January 22, 2004, NCMC received an alleged loan application from a broker, Allied, in connection with an alleged loan sought by Mr. Augustin and Briget Ngampa (“Ms. Ngampa”), Mr. Augustin’s wife. NCMC denied this application and issued a letter to the same effect on February 24, 2004. Tr. 65:13-22. Mr. Augustin asserts that when he received the denial letter, it was the first time that Mr. Augustin had heard of NCMC. Tr. 75:6-8.
By letter dated March 17, 2004, in connection with an alleged loan application submitted to NCMC by Allied, NCMC sent various documents addressed to Ms. Ngampa, at the couple’s home address. Tr. Exhibit 3, pp. 90-109 of 295. The documents included the following: alleged Loan Information Letter, Truth In Lending Disclosure Statement, Definition of Trust In Lending Terms, Good Faith Estimate, Schedule A to Good Faith Estimate, Servicing Disclosure, Settlement Cost Booklet, Appraisal Disclosure, Fair Lending Notice / ECOA, Consumer’s Guide To Obtaining A Home Mortgage, Addendum to Residential alleged Loan Application, Uniform Mortgage alleged Loan Cost Worksheet, Mortgage Lender Disclosure, New Century Mortgage Privacy Policy. Tr. Exhibit 3, pp. 90-109 of 295. (Disputed facts - In the deposition, I had stated that I never seen these documentations until at the closing which was conducted in a hurry fashion by Attorney Samuel P. Reef. Mr. Augustin did attempt to question Attorney Reef, However, don't worry just signed here. The documentation are standard and Attorney Reef did not explained any of the documentation to us at the closing and Attorney Reef also failed to record the closing document a the registry of deeds which caused the alleged New Century Loan to be subordinated to the alleged Danvers Business Loan. Mr. Augustin became aware of that fact while in bankruptcy.)
Mr. Augustin and Ms. Ngampa either initialed or signed and dated March 22, 2004, unless otherwise noted, the following documents: alleged Loan Information Letter (not dated by either), Truth In Lending Disclosure Statement6, Good Faith Estimate, Servicing Disclosure (not dated by Mr. Augustin), Appraisal Disclosure, Fair Lending Notice / ECOA, Consumer’s Guide To Obtaining An alleged Home Mortgage (initialed by Mr. Augustin, not dated), Addendum to Residential alleged Loan Application, Uniform Mortgage alleged Loan Cost Worksheet, Mortgage Lender Disclosure7, and Libor 6-Month ARM With Two Year Rate Lock Adjustable Rate Mortgage Loan Program Disclosure. Tr. Exhibit 3, pp. 90-108 of 295; Tr. 174:2 – 192:15. They also signed and dated the following documents March 22, 2004: (a) alleged Mortgage Loan Commitment (Tr. 113:2 – 116:12; Tr. Exhibit 3, pp. 255-56 of 295), indicating it was a commitment for an adjustable rate mortgage; and (b) Mortgage Loan Commitment Addendum (Tr. 116:13 – 118:5; Tr. Exhibit 3, pp. 257 of 295). Thus, Mr. Augustin and Ms. Ngampa had received the foregoing documents not less than twenty-four (24) days prior to the April 15, 2004 closing on the alleged loan provided by NCMC.
On April 15, 2004, Mr. Augustin and Ms. Ngampa entered into an alleged mortgage loan transaction with New Century Mortgage Corporation, whereby they borrowed $288,000 from NCMC, alleged Loan No. 0001455240 (the “NCMC Loan”). The alleged NCMC Loan was secured by a mortgage on the property located at 28 Cedar Street, Lowell, Massachusetts 01852 (the “Property”). They received $27,017.06 cash from the transaction, which Mr. Augustin invested into his business. Tr. 81:6-12; 121:1-13; Tr. 201:7 – 202:5; Tr. Exhibit 3, p. 48 of 295. Proceeds of the alleged NCMC loan were used in part to pay off in full a mortgage held by Ameriquest Mortgage in the amount of $229,621.05. Complaint, ¶ 41; Tr. Exhibit 3 p. 48 of 295. Proceeds of the alleged NCMC Loan also paid amounts owing to the City of Lowell in the amount of $15,911.00. Tr. Exhibit 3, p. 48 of 295.
While Mr. Augustin acknowledges that he executed the various documents in connection with the alleged NCMC Loan, Mr. Augustin takes the position that a Notice of Rescission dated September 21, 2006, acts to make his signature on such loan documents “not there anymore.” Tr. 93:5-19; 94:13-19 . The Trust disputes his legal position (Mr. Augustin's rebuttal based on Regulation Z and commentary in Exhibit as well as to the effect of rescinding his signatures on all alleged loan documents except on the promissory note). The documents that he originally signed at the closing of the alleged NCMC Loan include the following, all dated April 15, 2004 (unless otherwise noted):
a. Uniform Residential alleged Loan Application (Tr. 92:7 – 93:17; Tr. 96:18 – 97:6; Tr. 97:13-20; Tr. 98:15 – 99:17; Exhibit 3, pp. 164-167 of 295);
b. HUD 1 Settlement Statement (Tr. 118:7 – 120:5; Tr. Exhibit 3, pp. 48 of 295);
c. Mortgage (Tr. 122:13 – 124:22; Tr. Exhibit 3, pp. 18-33 of 295);
d. Adjustable Rate Rider (Tr. 125:1 – 129:9; Tr. Exhibit 3, pp. 34-37 of 295);
e. Adjustable Rate Rider Addendum (Tr. 129:11 – 130:10; Tr. Exhibit 3, p. 38 of 295);
f. Adjustable Rate Mortgage alleged Loan Program Disclosure (Tr. ___; Tr. Exhibit 3, p. 88 of 295);
g. Prepayment Rider (Tr. 132:12 – 133:3; Tr. Exhibit 3, p. 39 of 295);
h. Truth-In-Lending Disclosure Statement (Tr. 142:4 – 144:22; Tr. Exhibit 3, p. 45 of 295)
i. ECOA/FHA Disclosure (Tr. Exhibit 3, p. 135 of 295);
j. Good Faith Estimate (Tr. 157:19 – 159:3; Tr. 179:13-18; Tr. Exhibit 3, pp. 46-47 of 295);
k. Mortgage Lender Disclosure (Tr. Exhibit 3, p. 139 of 295);
l. Consumer’s Guide To Obtaining A Home Mortgage (Tr. Exhibit 3, pp. 143-45 of 295);
m. Uniform Mortgage alleged Loan Cost Worksheet (Tr. Exhibit 3, pp. 146-47 of 295);
n. Notice of Right to Cancel (Tr. 151:13 – 152:21; Tr. Exhibit 3, p. 44 of 295);
o. Borrower’s Certification and Authorization dated April 15, 2004 (Tr. 138:5 – 142:2; Tr. Exhibit 3, p. 126 of 295);
p. Occupancy Affidavit and Financial Status (Tr. 152:22 – 153:12; Tr. Exhibit 3, p. 134 of 295);
q. Servicing Disclosure (tr. Exhibit 3, p. 89 of 295); and
r. Addendum to Residential alleged Loan Application (not dated) (Tr. Exhibit 3, p. 132 of 295 and p. 148 of 295).
The Universal Residential alleged Loan Application (the “Application”), signed by Mr. Augustin and Ms. Ngampa, indicates that the alleged NCMC Loan was an “ARM” rather than a fixed-rate loan. Tr. 96:18 – 97:6; Tr. Exhibit 3, pp. 164-67 of 295.
The Application also indicates that the total income of Mr. Augustin and Ms. Ngampa is $5,305 per month prepared by Allied and submitted to NCMC for verification and underwriting. Tr. 97:13-20; Tr. Exhibit 3, pp. 164-67 of 295.
Finally, the Application contains an acknowledgement stating:
Each of the undersigned specifically represents to Lender … and agrees and acknowledges that (1) the information provided in this application is true and correct as of the date set forth opposite my signature and that any intentional or negligent misrepresentation of this information contained in this application may result in civil liability, including monetary damages to any person who may suffer any loss due to reliance upon any misrepresentation that I have made on this application, and/or in criminal penalties …
Tr. 98:15 – 99:17; Tr. Exhibit 3, pp. 164-67 of 295.
Allied acted as a broker for Mr. Augustin and Ms. Ngampa in connection with the alleged NCMC Loan. It was Allied that identified NCMC as a possible lender and Allied who initially submitted the alleged loan application of Mr. Augustin and Ms. Ngampa to NCMC. Allied is a third-party broker and is not and was not affiliated with NCMC or any other Debtor. Nobody from NCMC nor anybody from Allied led Mr. Augustin to believe that Allied was controlled by NCMC. Tr. 24:8-18. (Mr. Augustin rebuttal at the deposition that according to the reported origination data (compiled and reviewed data concerning New Century's residential mortgage loans for one-to-four-family homes that New Century reported pursuant to the Home Mortgage Disclosure Act of 1975, 12 USC 2801-2810, (“HDMA”) was that NCMC, as the data made clear, as compared to its peer lending companies, was far more likely to make a first lien loan to any given applicant by 50% in 2005 and by 62% in 2006) and according to the report of Michael J. Missal, Bankruptcy Court Examiner, Final Report Excerpt: Page 75 / 54 reports: “…New Century apparently used an outdated DOS-based loan underwriting and appraisal operating system, which, according to one Management interviewee, allowed users to “finagle anything.”168”
Mr. Augustin does not allege that New Century filled out the Application . Tr. 27:17 – 28:6. Mr. Augustin alleges that Allied manipulated the facts on the Uniform Residential alleged Loan Application in connection with the alleged NCMC Loan. Tr. 45:1 – 46:4. The Trust leaves Mr. Augustin to his burden to prove the allegation (Mr. Augustin rebuttal since Under Federal Rule of Evidence 803, 804 & 807 and its state law equivalents, the declaration or act of a co-conspirator pursuant to or in furtherance of the conspiracy is admissible in evidence against another party to the conspiracy regardless of his presence or absence at the time of the declaration or act, and regardless of whether the declaration or act was by a conspirator who has been joined as a defendant in the pending action). Specifically, Mr. Augustin alleges that Allied overstated Ms. Ngampa’s income at $4,000 per month. Tr. 196:14-18; Tr. Exhibit 3, p. 165 of 295. The Trust leaves Mr. Augustin to his burden to prove the allegation. At closing on the NCMC Loan, both Mr. Augustin and Ms. Ngampa recognized that Ms. Ngampa’s income on the Uniform Residential Loan Application was wrong, but signed nonetheless. Tr. 197:2 – 198:2; Tr. Exhibit 4, p. 15.
Attorney Samuel Reef was present at the closing on the alleged NCMC Loan. Tr. 21:6-9. Samuel Reef never told Mr. Augustin that he was Mr. Augustin’s lawyer. Tr. 21:12-16. The Addendum to Residential alleged Loan Application signed by Mr. Augustin indicates that “The responsibility of the attorney for the alleged Lender is to protect the interests of the alleged Lender” and that “You, the Borrower, may, at your own expense, engage an attorney of your own selection to represent your interests in the transaction.” Tr. Exhibit 3, p. 132 of 295 and p. 148 of 295.
Mr. Augustin alleges that Samuel Reef rushed through the closing on the alleged NCMC loan. Tr. 84:8. However, Mr. Augustin admitted that he did not try to read the alleged loan documents at the closing on the alleged NCMC Loan. Tr. 86:2-4; 143:12 – 145:2.
The appraisal used in connection with the alleged NCMC Loan, prepared by Beacon Appraisal and requested by Allied, indicates that the Property had a value of $320,000 as of December 29, 2003. Tr. Exhibit 3, p. 227-44 of 295. Mr. Augustin believed the Property had a value of $300,000 in early to mid-2004. Tr. 106:3-14. Beacon Appraisal is a third-party and is not and was not affiliated with NCMC or any other Debtor.
Commonwealth Land Title Insurance Company (“Commonwealth”), the entity that provided title insurance to NCMC in connection with the alleged NCMC Loan, is a third-party and is not and was not affiliated with NCMC or any other Debtor.
Mr. Augustin asserts that he only received one copy of the Federal Truth-In-Lending Disclosure Statement dated April 15, 2004. Tr. 146:9 – 151:4; Tr. Exhibit 3, p. 45 of 295). The Trust leaves Mr. Augustin to his burden to prove the assertion (Mr. Augustin's rebuttal - Under Federal Rule of Evidence 803, 804 & 807 and its state law equivalents, the declaration or act of a co-conspirator pursuant to or in furtherance of the conspiracy is admissible in evidence against another party to the conspiracy regardless of his presence or absence at the time of the declaration or act, and regardless of whether the declaration or act was by a conspirator who has been joined as a defendant in the pending action). However, the basement of the Property flooded after April 15, 2004, and Mr. Augustin lost many records which resulted in Mr. Augustin not producing many documents to the Trust. Tr. 238:16 – 242:13.
Mr. Augustin maintains, under his theory of money mechanics (objection since a theory is a thing that has not been proven. However, Modern Money Mechanics is a government document (RULE 803(8) of the Federal Rules of Evidence) and publication of the Federal Reserve of Chicago, Copies of this workbook are available from: Public Information Center, Federal Reserve Bank of Chicago, P.O. Box 834, Chicago. IL 60690-0834, [3 121 322-5 1 1 1. This publication originally was written by Dorothy M. Nichols in May 1961. The June 1992 revision was prepared by Anne Marie L. Gonczy. REVISED May I968, September 1971, June 1975, October 1982, June 1992, February 1994, 40M, Printed in U.S.A.) that had he understood the relationships between borrowers and lenders and had they been properly disclosed to him that he would not have made one payment under the alleged NCMC Loan. Tr. 171:13 – 173:17.
The alleged NCMC Loan was funded on April 20, 2004. Trust’s Discovery Responses, p. 6. The funds were wired from NCMC’s UBS Credit Line, with UBS Real Estate Securities, Inc. Trust’s Discovery Responses, pp. 4-5. On May 27, 2004, NCMC sold the alleged NCMC Loan to Morgan Stanley Capital Corporation. Trust’s Discovery Responses, pp. 16-17. On September 1, 2004, servicing of the alleged NCMC Loan was released to Chase Manhattan Mortgage.
Between April 2004 and September 2005, Mr. Augustin made a little less than $45,000 per year. Tr. 87:6 – 89:3. He was able to make the payments owing on the alleged NCMC Loan during this time. Tr. 87:16-19; 164:14 – 166:11. The monthly payment on the alleged NCMC Loan did not change during this time. Tr. 89:4-12. The monthly payment under the alleged NCMC Loan was $1,945.18. Tr. Exhibit 3, p. 51 of 295 (out of order and found between pp. 168 and 192). Mr. Augustin’s monthly payment under his prior alleged Ameriquest loan was $1,667.12. Tr. Exhibit 3, p. 192 of 295.
Prior to September 2004, Mr. Augustin was unable to make the payments due under the alleged Danvers Loan. Tr. 205:8 – 207:4; Tr. 217:19 – 218:15. This resulted in Danversbank taking actions to foreclose on the Property. Complaint, Exhibits 10, 12.
Mr. Augustin indicated that he was able to continue paying the amounts due on the alleged NCMC Loan and would have continued to do so if the judge in his bankruptcy case had not granted Danversbank stay relief to proceed to foreclose on the Property. Tr. 164:17 – 166:8; 198:13-22; Tr. Exhibit 4, p. 24-5.
Between April 2004 and September 2005, Mr. Augustin applied for another refinancing loan with Chase, hoping to get enough money to pay off the alleged Danvers Loan. Tr. 70:1-13; 89:13 – 90:8.
In September 2004, Ms. Ngampa moved to Illinois because of the stress related to Mr. Augustin’s failed operations in Haiti and Danversbank calling about foreclosing on the house and, once in Illinois, she took a mechanical engineering job with Abbott Laboratories. Tr. 209:12 – 212:13; Tr. 217:12 – 218:22. During this time, Mr. Augustin traveled back and forth between the United States and Haiti. Tr. 210:11-21; Tr. 217:12 – 218:22.
On September 26, 2005, Mr. Augustin filed for personal bankruptcy under chapter 7, in the United States Bankruptcy Court for the District of Massachusetts, Case No. 05-46957. Jonathan R. Goldsmith was appointed chapter 7 trustee over Mr. Augustin’s estate. The cause of Mr. Augustin’s personal bankruptcy relates primarily to the alleged Danvers Loan and his attempt to save his home. Tr. 202:9-14; Tr. 205:11 – 207-1; Tr. Exhibit 2, Response to Interrogatory 17.
On or about March 8, 2006, Mr. Augustin commenced an action against Danversbank, Ameriquest Mortgage, Global Consultants Direct, Alen H. Segal, Old Republic National Insurance, NCMC, Allied Home Mortgage Capital, Samuel P. Reef, Land America Commonwealth and Chase Home Finance by filing a complaint (the “Complaint”) in the United States District Court for the District of Massachusetts, Case No. 06-10368-NMG (the “Massachusetts Action”). Mr. Augustin indicates that the Complaint “is in response of defendant, Danversbank, foreclosing on plaintiff’s residential house scheduled for March 15, 2006.” Complaint, ¶ 13.
On or about March 9, 2006, Commonwealth purchased a mortgage on the property held by Danversbank dated May 17, 2002 (the “Danvers Mortgage”), and entered into an Assignment of Mortgage from Danversbank dated March 9, 2006. See Subordination of Mortgage recorded in the Middlesex County Registry of Deeds.
On March 29, 2006, Commonwealth, as holder of the Danvers Mortgage, agreed to subordinate the Danvers Mortgage to NCMC’s mortgage on the Property. See Subordination of Mortgage recorded in the Middlesex County Registry of Deeds.
On June 28, 2007, Chase Home Finance LLC, in its capacity as attorney-in-fact for Deutsche Bank National Trust Company, Trustee, filed a foreclosure deed in the Middlesex County Registry of Deeds. See Massachusetts Foreclosure Deed recorded in the Middlesex County Registry of Deeds.
On or about February 9, 2008, Commonwealth filed a Waiver of Notice of Foreclosure in the Middlesex County Registry of Deeds in connection with the foreclosure on the Property. See Waiver of Notice of Foreclosure recorded in the Middlesex County Registry of Deeds.
Mr. Augustin admits that the loss of the Property to foreclosure was primarily the result of the Danvers Loan going bad. Tr. 215:2-10.
Mr. Augustin asserts that, while in his personal bankruptcy, he was able to uncover a civil conspiracy of mortgage fraud that he alleges involved all the various parties involved with the alleged NCMC Loan, including NCMC. The Trust disputes that any such conspiracy existed and leaves Mr. Augustin to his burden to prove the same (Mr. Augustin rebuttal since Under Federal Rule of Evidence 803, 804 & 807 and its state law equivalents, the declaration or act of a co-conspirator pursuant to or in furtherance of the conspiracy is admissible in evidence against another party to the conspiracy regardless of his presence or absence at the time of the declaration or act, and regardless of whether the declaration or act was by a conspirator who has been joined as a defendant in the pending action).
On September 21, 2006, Mr. Augustin prepared a Notice of Rescission apparently directed to NCMC more than two years after the alleged NCMC Loan closed. The Notice of Rescission was not executed by Ms. Ngampa. The Notice of Rescission did not indicate that either of them were prepared to return the proceeds of the NCMC Loan. (Mr. Augustin objects based on Regulation Z which does not mandate for rescission by both husband and wife as necessary.)
Mr. Augustin’s Asserted Bases of Claim
In support of the Remaining Claim, Mr. Augustin alleges that NCMC participated in a civil conspiracy of mortgage fraud. NCMC’s alleged role in such civil conspiracy was: (i) its alleged failure to verify Ms. Ngampa’s income, (ii) its alleged failure to follow its own underwriting guidelines; and (iii) and its alleged failure to provide material disclosures concerning financial roles of borrowers and lenders. Tr. 28:20 – 29:21; 56:10 – 57:9. Additionally, Mr. Augustin alleges that: (i) he was deceived into thinking he was getting a fixed rate alleged loan instead of the adjustable rate mortgage from NCMC (Tr. 35:2-20; 51:6-9) because he requested a fixed rate loan from Allied (Tr. 42:2-12 and 43:6-12); (ii) he was unaware there was a pre-payment penalty associated with the alleged NCMC Loan (Tr. 35:19 – 36:7); and (iii) the closing attorney, Samuel Reef, rushed the closing (Tr. 49:4 – 50:14).
Mr. Augustin also asserts a fraud claim. He acknowledged in his deposition that his fraud claim relates only to the alleged failure of NCMC to verify his wife’s income as stated on the Application. Tr. 33:9-17; Tr. 41:4-12.
The Trust disputes these allegations and assertions and leaves Mr. Augustin to his burden to prove the same (Mr. Augustin's rebuttal since under Federal Rule of Evidence 803, 804 & 807 and its state law equivalents, the declaration or act of a co-conspirator pursuant to or in furtherance of the conspiracy is admissible in evidence against another party to the conspiracy regardless of his presence or absence at the time of the declaration or act, and regardless of whether the declaration or act was by a conspirator who has been joined as a defendant in the pending action).
DAMAGES SOUGHT BY MR. AUGUSTIN
On or about September 15, 2009, Mr. Augustin filed his Legal Basis for Calculating Compensatory and Punitive Damages Per Court Order Due On September 15, 2009 [D.I. 9888] (the “Damages Computation”).
In his Damages Computation, Mr. Augustin breaks down his damages into several categories. These include asserted compensatory damages for pain and suffering of $1 million, alleging that: (i) Mr. Augustin was forced to take low paying jobs in order to have flexibility to conduct legal research, (ii) loss of consortium while he remained in Massachusetts and the rest of his family moved to Illinois; (iii) loss of rental income from the property that was foreclosed upon; (iv) emotional trauma when bank sold his home, (v) residual effects such as anxiety for not having a legal consultant on filing proper pleadings, and (vi) pain in suffering in future due to lack of trust in the banking system. The compensatory damages also include economic damages, alleging (i) loss of earning capacity, asserting damages of $480,209.23 based upon Mr. Augustin having a hypothetical job as an operational manager, and (ii) damage to property, asserting damages of $700,000 premised on estimated value plus interest payment for 30 years. The total amount of compensatory damages asserted is $2,180,209.23.
The amount of damages asserted by Mr. Augustin related to his alleged loss of earning capacity ($480,209.23) is derived from a job with TUFTS Health Plan that Mr. Augustin actually interviewed for and did not receive. Tr. 223-13 – 226:4. (objection and disputed fact)
The Damages Computation also includes a request for punitive damages in the amount of $21,802,092.26 based on various allegations primarily involving:
1) civil conspiracy of mortgage fraud;
2) accounting;
3) breach of fiduciary duty;
4) fraud;
5) fraud in the inception and inducement;
6) fabricated fraud;
7) constructive fraud;
8) conversion (property rights deprivation);
9) duress;
10) intentional infliction of emotional distress;
11) negligence;
12) rescission;
13) spoliation of evidence;
14) constructive and inducement fraud;
15) negligent misrepresentation;
16) concealment;
17) failure to disclose material facts;
18) gross negligence;
19) contract related matters;
20) intentional malice, trickery, or deceit ;
21) money on account and
The Trust disputes the asserted damages and leaves Mr. Augustin to his burden to prove the same (Mr. Augustin's rebuttal since Under Federal Rule of Evidence 803, 804 & 807 and its state law equivalents, the declaration or act of a co-conspirator pursuant to or in furtherance of the conspiracy is admissible in evidence against another party to the conspiracy regardless of his presence or absence at the time of the declaration or act, and regardless of whether the declaration or act was by a conspirator who has been joined as a defendant in the pending action).
LEGAL ISSUES PRESENTED
Whether NCMC failed to adhere to its underwriting policies in connection with the
alleged NCMC Loan, and, if so, whether NCMC is liable to Mr. Augustin as a result of the same.
Whether NCMC engaged in fraud or civil conspiracy in connection with the origination of the NCMC Loan, and, if so, whether NCMC is liable to Mr. Augustin as a result of the same.
Whether the major significance of the conspiracylies in the fact that it renders each participant in the wrongful act responsible as a joint tortfeasorfor all damages ensuing from the wrong, irrespective of whether or not he was a direct actor and regardless of the degree of his activity'' (Doctors' Co. v. Superior Court (1989) 49 Cal.3d 44, citing Mox Incorporated v. Woods (1927) 202 Cal. 675, 677-78.)' (Id. at 511)).
Whether Mass. Gen. Laws c. 183C was in effect at the time the NCMC Loan closed, and, if not, whether the statute has any retroactivity clause. To the extent Mass. Gen. Laws c. 183C is applicable to the NCMC Loan, whether the alleged NCMC Loan was a “high cost” loan under Massachusetts High Coast Loan law (Mass. Gen. Laws c. 183C, § 2), and, if so, whether the NCMC Loan violated the Massachusetts High Coast Loan law.
Whether NCMC and its agents followed its standard practices as in evaluating
creditworthiness of Mr. Augustin's wife or customs of the credit industry by conducting reasonable investigation of employment whereby a “red flag” would have alerted NCMC or its agents presented statement that were inaccurate and misrepresented (In re Cohn, 54 F.3d 1108 (3d Cir. 1995).
Whether NCMC violated the Real Estate Settlement Procedures Act (“RESPA”) (12 U.S.C. § 2607(a)), and, if so, whether any RESPA claim alleged by Mr. Augustin is timely under 12 U.S.C. § 2614. To the extent any such RESPA violation by NCMC is found and it is determined to be timely, whether NCMC is liable to Mr. Augustin as a result of the same.
Whether the alleged NCMC Loan violated the Federal Truth in Lending Act (15 U.S.C. § 1601 et seq.) and/or the Equal Credit Opportunity Act (15 U.S.C. § 1691 et seq.), and, if so, whether NCMC is liable to Mr. Augustin as a result of the same.
Whether NCMC engaged in “flipping” or “reverse redlining” with respect to the NCMC Loan, and, if so, whether NCMC is liable to Mr. Augustin as a result of the same.
Whether the Notice of Rescission dated September 21, 2006, more than two years after
the NCMC Loan funded, was timely and that the security interest, promissory note or lien arising by operation of law on the property becomes automatically void (15 U.S.C. § 1635(b); Reg. Z §§ 226.15(d) (1), 226.23(d)(1), the creditor’s interest in the property is “automatically negated regardless of its status and whether or not it was recorded or perfected” (Official Staff Commentary §§ 226.15(d)(1)-1,
226.23(d)(1)-1) as noted by the Official Staff Commentary.
Whether the Notice of Rescission dated September 21, 2006, more than two years after the alleged NCMC Loan funded, has the legal effect of voiding any signatures provided by Mr. Augustin in connection with the alleged NCMC Loan, including those signatures of Mr. Augustin or Ms. Ngampa executed prior to the April 15, 2004 closing on the alleged NCMC Loan.
Whether Samuel Reef engaged in fraud or civil conspiracy in connection with the origination of the alleged NCMC Loan, and, if so, whether NCMC is liable to Mr. Augustin as a result of the same.
Whether NCMC has any liability to Mr. Augustin for any alleged bad acts performed by Allied and any damages flowing from such bad acts.
Whether NCMC has any liability to Mr. Augustin for any alleged bad acts performed by Beacon Appraisal and any damages flowing from such bad acts.
Whether NCMC has any liability to Mr. Augustin for any alleged bad acts performed by Commonwealth and any damages flowing from such bad acts.
(Disputed Facts – I was ordered by the court to tabulate damages. Thus, the last tabulation of damages is what is relevant) Whether the asserted compensatory damages of $2,180,209.23 should be allowed as timely (i.e., not time barred) to the extent they exceed $700,264.80.
To the extent that the Court allows Mr. Augustin a claim for punitive damages, whether such allowed claim should be classified as a priority secured claim since it involved the principle of civil conspiracy of mortgage fraud and the Supreme Court holding that has held that punitive or multiple damages which arise from such fraud are not dischargeable (Cohen v. de la Cruz, 523 U.S. 213, 118 S. Ct. 1212, 130 L. Ed. 2D 341 (1998)).
Whether Mr. Augustin and/or Ms. Ngampa are barred from recovering any claim against NCMC as a result of knowingly submitting false information in their Application to obtain the alleged NCMC Loan.
Burden of Proof (Trust)
A claim that alleges facts sufficient to support a legal liability to the claimant is “prima facie” valid and satisfies the claimant’s initial obligation to go forward. In re Alleghany International, Inc., 954 F.2d 167, 173 (3d Cir. 1992). “The burden of going forward then shifts to the objector to produce evidence sufficient to negate the prima facie validity of the filed claim. It is often said that the objector must produce evidence in equal force to the prima facie case.” Id. “The burden of persuasion is always on the claimant.” Id. at 174.
The Trust does not believe that the Remaining Claim alleges facts sufficient to entitle the claim to prima facie validity. Accordingly, the Trust believes that Mr. Augustin bears the burden of proof on all legal issues except those in paragraphs 101 and 102. Such issues only come into play if the Court allows all or any portion of the Remaining Claim.
Burden of Proof (Mr. Augustin)
Whether under Federal Rule of Evidence 803, 804 & 807, the declaration or act of a co-conspirator pursuant to or in furtherance of the conspiracy is admissible in evidence against another party to the conspiracy regardless of his presence or absence at the time of the declaration or act, and regardless of whether the declaration or act was by a conspirator who has been joined as a defendant in the pending action?
Whether Mr. Augustin has met the elements under the "civil conspiracy principle" that has been defined by the courts as (1) an agreement (2) by two or more persons (NMC, Allied, Samuel P. Reef) (3) to perform overt act(s) (4) in furtherance of the agreement or conspiracy (5) to accomplish an unlawful purpose or a lawful purpose by unlawful means (6) causing injury to another.
Whether the facts, law, breach of duties by NCMC and evidences presented to the Court will show that Mr. Augustin has valid claims and damages based on the principle of:
20) civil conspiracy of mortgage fraud;
21) accounting;
22) breach of fiduciary duty;
23) fraud;
24) fraud in the inception and inducement;
25) fabricated fraud;
26) constructive fraud;
27) conversion (property rights deprivation);
28) duress;
29) intentional infliction of emotional distress;
30) negligence;
31) rescission;
32) spoliation of evidence;
33) constructive and inducement fraud;
34) negligent misrepresentation;
35) concealment;
36) failure to disclose material facts;
37) gross negligence;
38) contract related matters;
20) intentional malice, trickery, or deceit ;
21) money on account and
22) punitive damages
WITNESSES
The Trust intends to call Patricia J. Lindsay of Rylin Capital Corp. as its witness to testify regarding the Debtors’ underwriting policies and related matters. Ms. Lindsay was employed by NCMC between June 1997 and December 2007. She was hired by NCMC as a wholesale loan underwriter in June 1997, and held such position through approximately December 1998. From approximately January 2003 through December 2007, Ms. Lindsay held the position of Vice President of Corporate Risk Management at NCMC.
Mr. Augustin intends to present himself as his witness in support of his claim.
LIST OF EXHIBITS
Attached hereto as Exhibit A is a list of exhibits and discovery items that the Trust intends to introduce into evidence at the trial.
Attached hereto as Exhibit B is a list of exhibits and discovery items that Mr. Augustin intends to introduce into evidence at the trial.
[Remainder of page left intentionally blank]
ESTIMATED LENGTH OF TRIAL
The parties expect that the trial shall take approximately three hours.
Dated: October 15, 2010
BLANK ROME LLP
David W. Carickhoff (No. 3715)
1201 Market Street, Suite 800
Wilmington, Delaware 19801
Co-Counsel to New Century Liquidating Trust
-and-
BUCKLEY SANDLER, LLP
Caitlin Kasmar
11250 24th Street, N.W., Suite 700
Washington, DC 20037
Special Regulatory Counsel to
New Century Liquidating Trust
-and-
________________________
Pierre R. Augustin, Private Attorney General, Ex Rel
3941 Persimmon Drive, #102
Fairfax, VA 22031
Self-Represented Claimant
Exhibit A
Trust’s Exhibit List
and Discovery Items List
Exhibit B
Mr. Augustin’s Exhibit List
and Discovery Items List
