Eyler v. 3 Vista Court LLC

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF MARYLAND
at Greenbelt
IN RE: 	:
:
DARREN LEE EYLER, 	: 	Case No. 05-32014PM
: 	Chapter 13
Debtor. 	:
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DARREN LEE EYLER, 	:
Plaintiff, 	:
vs. 	: 	Adversary No. 06-1671PM
:
3 VISTA COURT LLC, 	:
Defendant. 	:
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AMENDED
PROPOSED FINDINGS OF FACT
AND CONCLUSIONS OF LAW
(as revised after remand)
Findings of Fact
1. 	The Plaintiff, Darren Lee Eyler (“Eyler” or “the Plaintiff”), and his wife, Susan
Eyler (collectively, “the Eylers”), owned the subject real property known as 3 Vista Court,
Thurmont, Maryland, that they acquired by deed recorded November 30, 1994. At all times
material, the property was subject to a lien held by Ever Home Mortgage Company f/k/a
Alliance Mortgage Company (“Ever Home”) (Exs. 5, 7 and 13).
2. 	As a result of the Eylers’ failure to make required payments on the Note secured by
a Deed of Trust, Ever Home scheduled a foreclosure sale of the property for July 8, 2005 (Ex. 8).
A foreclosure proceeding was reactivated. That foreclosure proceeding was stopped by the filing
of the first bankruptcy case by Eyler, Case No. 03-19513. The bankruptcy case was dismissed
Date signed October 28, 2008
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on May 25, 2005, on the motion of the Chapter 13 Trustee on account of Eyler’s failure to make
required plan payments. On July 8, 2005, the amount owed to Ever Home was $167,205.42 (Ex.
5). The amount required to bring the loan current was $15,341.32 (Exs. 8 and 9).
3. 	Based on the uncontradicted testimony of Eyler, the court finds the value of the
subject property on July 8, 2005, was $280,000.00. Eyler’s testimony was based on comparable
sales in the neighborhood. The court’s valuation is also based in part upon the liquidation
damages provision in a document signed by the parties calling for the payment of $100,000.00
by the Eylers in the event they failed to comply with various obligations imposed upon them in
connection with this transaction (Ex. 15).
4. 	As a result of receiving a flyer from an entity that called itself Home Savers Plus
(“Home Savers”), Eyler called the telephone number listed in the flyer and spoke to a person
identified as Luther Hector (“Hector”). Eyler told Hector that his house was in foreclosure and
asked if Hector could stop the sale. Hector told Eyler that he had helped people before and could
help him now. Prior to their conversation, Hector had found out the amount required to cure the
deficiency and bring the Note current. Hector stated that he would help out and pay the amount
due that would stop the sale. In exchange for this, Hector would be paid $60,000.00 when the
property was refinanced. Presumably, the $60,000.00 to be paid to Hector would come from the
proceeds of the refinancing. Hector advised Eyler that it would not be useful to file another
bankruptcy case to stop a foreclosure, as he had done previously. Eyler had received other
unsolicited messages about foreclosure help, but selected Hector because of the speed with
which he said he could act.
5. 	At all times material, Hector was a principal of Home Savers and of the Defendant,
3 Vista Court LLC.
6. 	Hector told Eyler that he wanted to see the house before he could commit the
money to stop the foreclosure. In due course, Hector arrived at the Eylers’ house with two other
men – one identified as a “Mr. Ware,” later determined to be Barrett Ware (“Ware”), and the
other as a contractor. The purpose of their visit was to ascertain the condition of the property so
as to enable Hector to determine if there was equity in the property to support the advance and
whether the transaction would generate a profit.
7. 	To effectuate the transaction, on July 8, 2005, the Eylers and their two children
went to Home Savers’ office at 1717 K Street, N.W., Suite 600, Washington, D.C. Their
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appointment was at 10:30 a.m. The foreclosure sale was scheduled for 1:00 p.m. The Eylers
got lost on the way and did not arrive until 11:00 a.m., and as a result, the settlement transaction
was rushed through.
8. 	The Eylers were ushered into a large conference room by Hector where they were
joined by a “Mr. Brant” and later by a notary public. During this hurried session, the Eylers
signed the following documents:
a. A Deed conveying the property to 3 Vista Court LLC executed July 8, 2005, and
recorded December 22, 2005 (Ex.1).
b. Two Powers of Attorney appointing Ware as attorney-in-fact to do everything
requisite and necessary relating to the property. This enabled 3 Vista Court LLC to
transfer or “flip” the property to a third party without the necessity of paying a
transfer tax on the Eylers’ transfer to 3 Vista Court LLC (Exs. 11 and 12).
c. A contract for the sale of the property by the Eylers to 3 Vista Court LLC for the
sum of $170,000.00 (Ex. 14).
d. A document entitled “Addendum 3 Vista Court, Thurmont, Maryland 21788 -
Darren & Susan Eyler,” wherein the Eylers acknowledged that they were to receive
$20,000.00, subject to a credit to the buyer of all moneys paid to stop the
foreclosure sale and less “any sums paid to maintain payments on the mortgage
until closing.” This document stated that the Eylers were to vacate the property by
September 9, 2005, at 5:00 p.m., subject to a penalty of $500.00 a day for each day
after that date that the Eylers did not vacate the property, as well as that the Eylers
would be subject to liquidated damages of $100,000.00 in the event they failed to
comply with the terms of the contract. This document also references an option
granted to the Eylers to repurchase the property (Ex. 15).
e. Affidavits reflecting the absence of tax lien judgments or other encumbrances on
the property (Exs. 16 and 17).
f. An “Option to Purchase” also signed by Barrett Ware that gave the Eylers an
unassignable option to repurchase the subject property for $215,000.00, with all
costs of the resale to be borne by the Eylers (Ex. 18).
g. An “Assignment of Proceeds” whereby the Eylers, as assignors, agreed to turn
over to 3 Vista Court LLC $60,341.32 and “all its [sic] rights and interest in and to
certain proceeds from settlement on the property commonly known as . . . .” (Ex.
26).
9. 	The Eylers were not presented with a HUD-1 Settlement Statement, Truth-in-
Lending disclosures or documents required under the Maryland Protection of Homeowners in
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Foreclosure Act (“PHIFA”), MD . CODE ANN . REAL PROP . §§ 7-301 to 7-321 (2006 Supp.), such
as a foreclosure consulting contract (PHIFA § 7-306(a)), a Notice of Rescission (PHIFA § 7-
306(c)) or a Notice of Transfer of Deed or Title (PHIFA § 7-310).
10. 	There was no “settlement” of the transaction as defined by PHIFA § 7-311(a)(5) in
that the transaction was not conducted by a settlement agent who was not employed by or an
affiliate of the Defendant. While the sales contract designated Oberg & Berlin as the settlement
agent, that entity had nothing whatsoever to do with the transaction.
11. 	The terms by which the Eylers could repurchase their residence by August 9, 2005,
at 5:00 p.m., by the payment of $45,000.00 in addition to the $15,341.32 advanced on their
behalf, were unfair and indubitably commercially unreasonable. The interest rate charged for the
advance was well in excess of 3000% per annum.
12. 	But for the intervention of the Defendant, the foreclosure sale would have
proceeded as scheduled. However, the fact remains that because of the approximately
$100,000.00 of equity that the Eylers had in the property, they would have had the benefit of the
surplus realized at the sale. Cf. Johnson v. Wheeler, 492 F.Supp. 2d 492, 508 (D. Md. 2007).
The promise by the Defendant to pay the Eylers $20,000.00 of “net proceeds” was illusory
because of the Eylers’ obligation to repay the Defendant the money paid to stop the foreclosure
sale and the payments made by it to maintain the mortgage.
13. 	The Eylers sustained damages as a result of the Defendant’s willful actions in
violation of Maryland law by stripping and acquiring their $100,000.00 equity in the property.
14. 	The Defendant advanced $15,341.32 on behalf of the Eylers in order to stop the
foreclosure.
Proposed Conclusions of Law
1. 	The bankruptcy court has jurisdiction over this dispute by virtue of 28 U.S.C.
§ 1334(b) a matter related to the case of Darren Lee Eyler, Case No. 05-32014. It is referred to
the bankruptcy court for trial by 28 U.S.C. § 157(a) and Local Rule 402 of the United States
District Court for the District of Maryland.
2. 	This is not a core proceeding and this court submits these Amended Proposed
Findings of Fact and Conclusions of Law pursuant to 28 U.S.C. § 157(c)(1).
3. 	PHIFA is applicable to this transaction.
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1 PHIFA § 7-311(a)(5) defines “settlement” as:
“Settlement” means an in-person, face-to-face meeting with the homeowner to complete final
documents incident to the sale or transfer of real property, or the creation of a mortgage or
equitable interest in real property, conducted by a settlement agent who is not employed by or an
affiliate of the foreclosure purchaser, during which the homeowner must be presented with a
completed copy of the HUD-1 Settlement Form.
2 PHIFA § 7-311(b)(1) provides:
(b) A foreclosure purchaser may not:
(1) Enter into, or attempt to enter into, a foreclosure reconveyance with a homeowner unless:
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4. 	3 Vista Court, Thurmont, Maryland, was a “residence in foreclosure” as that term is
defined by PHIFA § 7-301(j) in that it was the principal place of residence of the Eylers and a
petition to docket a foreclosure had been filed and a foreclosure sale set.
5. 	Hector and Ware, individually and as principals of 3 Vista Court LLC, were
“foreclosure consultant(s)” as defined in PHIFA § 7-301(b) in that they promised to stop a
foreclosure sale to assist the Eylers in obtaining a loan or advance of funds and to save the
Eylers’ residence from foreclosure. These two individuals rendered “foreclosure consulting
service(s)” under PHIFA § 7-301(d).
6. 	3 Vista Court LLC is a “foreclosure purchaser” under PHIFA § 7-301(e) as the
recipient of a “foreclosure reconveyance” under PHIFA § 7-301(f). It obtained a Deed
conveying to it the Eylers’ property during a proposed foreclosure proceeding.
7. 	The Defendant violated PHIFA by failing to provide the Eylers with required
notices (PHIFA §§ 7-306(a), 7-306(c) and 7-310). The Eylers’ right to rescind the transfer has
yet to commence as 3 Vista Court LLC never complied with the terms of PHIFA § 7-310(a).
8. 	The recordation of the Deed prior to the expiration of the Eylers’ right to rescind or
cancel the transaction was likewise a violation of PHIFA § 7-311(6).
9. 	There was an absolute failure to arrange for the requirement of a “settlement” as
mandated by PHIFA. 1 The only parties present were principal(s) of the Defendant, a “Mr.
Brant” and a notary. Moreover, Ware expressly disclaimed in Exhibit 19 “that it is very unlikely
that a loan could be obtained . . . to repurchase the property . . . .” Not only was there no
evidence of the Eylers’ reasonable ability to repurchase the property (PHIFA § 7-311(b)(1)),
there was an express statement by the Defendant of their inability to do so.2
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(i) The foreclosure purchaser verifies and can demonstrate that the homeowner has or will
have a reasonable ability to pay for the subsequent reconveyance of the property back to
the homeowner on completion of the terms of a foreclosure conveyance, or, if the
foreclosure conveyance provides for a lease with an option to repurchase the property, the
homeowner has or will have a reasonable ability to make the lease payments and
repurchase the property within the term of the option to repurchase;
(ii) The foreclosure purchaser and the homeowner complete a formal settlement
before any transfer of an interest in the property is effected; and
(iii) The foreclosure purchaser complies with the requirements of the federal Home
Ownership Equity Protection Act, 15 U.S.C. 1639, and its implementing regulations for
any foreclosure reconveyance in which the homeowner obtains a vendee interest in a
contract for deed[.]
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10. 	The Eylers have the right to rescind this transaction. The three business day period
within which they may exercise their right to rescind the foreclosure reconveyance never began
to run as the Defendant did not provide the Eylers with the Notice of Transfer of Deed of Title
required under PHIFA § 7-310(a). (“The time during which the homeowner may rescind the
contract or transfer does not begin to run until the foreclosure purchaser has complied with this
section.” PHIFA § 7-310(e)).
11. 	The right to rescind is not conditioned on the repayment of funds advanced by the
Defendant. PHIFA § 7-310(i).
12. 	The Deed from the Eylers to the Defendant was unlawfully recorded before the
expiration of the rescission period. PHIFA § 7-310(k).
13. 	Accordingly, under PHIFA and upon rescission, within 60 days, the Eylers must
repay the Defendant all money spent by it on their behalf, together with interest calculated at the
rate of 8% a year. The only money spent appears to be the $15,341.32 advanced to stop the
foreclosure. PHIFA § 7-305(e).
14. 	While the transaction was characterized as a sale, the substance of the transaction as
marketed to the Eylers was a loan. There is no other explanation for the terms of the Assignment
of Proceeds (Ex. 26) that provides for the payment of $60,341.32 from the proceeds of any sale
by the Eylers to 3 Vista Court LLC. As such, the Defendant violated the Truth in Lending Act
(“TILA”), 15 U.S.C. §§ 1601 et seq., when it failed to provide the appropriate disclosures and
the notice of the right to rescind. The Eylers are entitled to statutory damages totaling $1,500.00
and attorneys fees for this violation.
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3 RICO § 1961(6) provides:
As used in this chapter –
(6) “unlawful debt” means a debt (A) incurred or contracted in gambling activity which was in
violation of the law of the United States, a State or political subdivision thereof, or which is
unenforceable under State or Federal law in whole or in part as to principal or interest because of
the laws relating to usury, and (B) which was incurred in connection with the business of gambling
in violation of the law of the United States, a State or political subdivision thereof, or the business
of lending money or a thing of value at a rate usurious under State or Federal law, where the
usurious rate is at least twice the enforceable rate[.]
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15. 	Under MD . CODE ANN . COMM. LAW §12-404(d) (2005), the maximum rate of
interest charged on a secondary mortgage loan may not exceed 24% per annum. The collection
of interest at the exorbitant rate charged by the Defendant amounted to the collection of an
“unlawful debt,”3 as defined by the Racketeering Influenced and Corrupt Organizations Act
(“RICO”), 18 U.S.C. § 1961 et seq., as it is more than twice the enforceable legal rate. This act
brings the Defendant’s conduct in lending money at a rate usurious under Maryland law and
within the purview of RICO. See 18 U.S.C. § 1962; United States v. Weiner, 3 F.3d 17, 24 (CA1
1993); United States v. Giovanelli, 945 F.2d 479 (CA2 1991); United States v. Megale, 363 F.
Supp. 2d 359 (D. Conn. 2005). A criminal violation need not be prosecuted as a prerequisite to a
RICO action. See Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 492 (1985).
16. 	RICO §1964(c) provides a civil remedy to “[a]ny person injured in his business or
property by reason of a violation of section 1962 of this chapter . . . and shall recover threefold
the damages he sustains and the cost of the suit, including a reasonable attorney’s fee . . . .” The
bankruptcy court has subject matter jurisdiction over this RICO claim as a related matter and
may issue this proposed conclusion. See, Ghee v. Retailers Nat’l Bank, 271 Fed. Appx. 858
(CA11 2008).
17. 	The Plaintiff sustained damages of $84,658.78 on account of this RICO violation,
that is the loss of the $100,000.00 equity in his residence, less the payment made on his behalf of
$15,341.32.
18. 	Under RICO, the Plaintiff is entitled to threefold damages or a total of $253,976.34
plus reasonable attorney’s fees that will be allowed after the filing of an application for
compensation.
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These Amended Proposed Findings of Fact and Conclusions of Law are submitted to the
United States District Court for the District of Maryland pursuant to 28 U.S.C. § 157(c)(1).
cc: 	3 Vista Court LLC, c/o Michelle E. Stawinski, P.O. Box 35, Riverdale, MD 20738
Tonya L. Waller, 1629 K Street, N.W., Suite 300, Washington, DC 20006
Michelle E. Stawinski, P.O. Box 35, Riverdale, MD 20738
Darren Lee Eyler, c/o Scott C. Borison, Esq., 550 Buckeystown Pike, Frederick, MD
21703
Scott C. Borison, Esq., 550 Buckeystown Pike, Frederick, MD 21703
Douglas Bowman, 550 Buckeystown Pike, Frederick, MD 21703
United States Trustee, 6305 Ivy Lane, #600, Greenbelt MD 20770
End of Amended Proposed Findings of Fact and Conclusions of Law
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