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Fuoco v. Bank of America

United States District Court, E.D. Michigan, Southern Division

June 30, 2015

JOSEPH A. FUOCO, Plaintiff,
BANK OF AMERICA, et al., Defendants

For Joseph A. Fuoco, Plaintiff: John R. Badeen, LEAD ATTORNEY, XUEREB LAW GROUP PC, Canton, MI.

For Bank of America, Defendant: T. L. Summerville, Dykema Gossett (Detroit), Detroit, MI.

For Seterus, Inc., Defendant: Jerome Crawford, Ari M. Charlip, Dickinson Wright PLLC, Troy, MI.

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MARK A. GOLDSMITH, United States District Judge.


This is a mortgage foreclosure case. Although acknowledging that he was delinquent in paying his property taxes on three separate occasions, Plaintiff Joseph Fuoco claims Defendants Bank of America and Seterus, Inc. wrongfully imposed and enforced an escrow account, thereby increasing his monthly payments. Defendants filed motions to dismiss (Dkts. 10, 11), Plaintiff filed a response (Dkt. 16), and Defendants filed replies (Dkts. 19, 20). The Court heard oral argument on April 9, 2015, and took the matter under advisement.

For the reasons discussed below, the Court concludes that Defendants did not waive their right to impose and enforce an escrow; nor did Defendants act wrongfully or in bad faith with respect to the escrow in light of Plaintiff's admitted failure to

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pay his taxes on time. Therefore, the Court grants Defendants' motions and dismisses Plaintiff's complaint with prejudice.


Plaintiff Joseph Fuoco executed a note and mortgage with non-party Quicken Loans Inc. (" Quicken" ) in 2007 for the purchase of property. See Note (Dkt. 11-2); Mortgage (Dkt. 11-3). At the same time, Plaintiff signed a Waiver of Escrow with Quicken. Waiver of Escrow (Dkt. 11-4).[1] Under that waiver, Plaintiff was to be " solely responsible for the timely payment of any and all property taxes" and other items, collectively called the " Escrow Items." Id. The waiver also provided, in relevant part, that the lender " shall have the right to establish or reestablish an escrow account for the payment of the Escrow Items . . . in the event that during the term of the mortgage loan: . . . Applicant(s) fail(s) to pay any of the Escrow Items in a prompt and timely manner" or " [i]t becomes necessary for Lender to advance funds to pay all or any portion of the Escrow Items." Id. The mortgage similarly provided that,

[i]f Borrower is obligated to pay Escrow Items directly, pursuant to a waiver, and Borrower fails to pay the amount due for an Escrow Item, Lender may exercise its rights under Section 9 and pay such amount and Borrower shall then be obligated under Section 9 to repay to Lender any such amount. Lender may revoke the waiver as to any or all Escrow Items at any time by a notice given in accordance with Section 15 and, upon such revocation, Borrower shall pay to Lender all Funds, and in such amounts, that are then required under this Section 3.

Mortg. at 5.

Defendant Bank of America was the servicer for the loan. In 2010, Plaintiff fell behind on his Summer and Winter taxes. He ultimately paid these taxes late. Compl. ¶ ¶ 9-10 (Dkt. 1-1). Bank of America raised no objection to the late payment, and it did not impose an escrow, despite Plaintiff's failure to make a timely payment on an Escrow Item. Id. ¶ 11. Plaintiff then fell behind on his 2011 Winter taxes. Id. ¶ 12. When he went to pay these taxes late, he discovered that Bank of America had already paid them. Id. ¶ 13. Plaintiff, therefore, sent the money for the taxes to Bank of America, which accepted the funds. Id. ¶ ¶ 14-15. However, Bank of America then imposed an escrow. Id. ¶ 16.

Despite the imposition of the escrow, Plaintiff continued sending his regular monthly payments -- composed only of principal and interest, without escrow amounts included -- to Bank of America. Id. ¶ 17. Bank of America accepted these payments. Id. ¶ 18. After servicing duties were transferred to Seterus, however, Seterus began rejecting these monthly payments. Id. ¶ 20.[2] Plaintiff subsequently attempted to make a lump sum of his regular payments, without the escrow amounts included, but this too was rejected by Seterus. Id. ¶ 21. Plaintiff then began self-escrowing his monthly payments,

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rather than making any payment to Seterus. Id. ¶ 22. Seterus ultimately initiated foreclosure proceedings, and this suit followed. See id. ¶ ¶ 39-40.

Plaintiff brings three causes of action: (i) breach of contract; (ii) declaratory judgment; and (iii) violation of the Michigan Mortgage Brokers, Lenders, and Servicers Licensing Act (" MBLSLA" ), Mich. Comp. Laws § 445.1651, et seq.[3] These claims all revolve around Plaintiff's central assertion that Defendants acted in bad faith by imposing and enforcing an escrow, because, according to ...

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