Bank to pay $2 million for ‘mistaken’ foreclosure

Normans

Ed Kemmick/Last Best News

Liz and Jason Norman, inside the house on Howard Avenue that they are nearly done renovating.

A District Court jury has awarded a Billings man just over $2 million in his action against a bank that foreclosed on and sold a house that he and his wife had purchased outright for cash two years earlier.

After a four-day trial in the court of Yellowstone County District Judge Ingrid Gustafson last week, the jury unanimously awarded Jason Norman $350,000 in lost profitability, $100,000 for emotional distress and $1.6 million in punitive damages against Deutsche Bank National Trust Co.

Also named as defendants were Ocwen Loan Servicing, which handled the sale of the Normans’ house, and MOM Haven 6 LLP, the company to which the house was sold.

In 2010, Jason and Liz Norman moved back to Billings, Jason’s hometown, from Austin, Texas, where they’d spent 15 years.

They bought a 120-year-old farmhouse at 633 Howard Ave. for $50,000 and spent two years and $40,000 renovating it themselves. Three years ago this month, with the house by then valued at $230,000, they began the process of obtaining a home equity loan on it. With that loan money, they planned to buy another property they could renovate and re-sell.

That’s when they were told by the Montana Department of Revenue that the house on Howard was no longer theirs, that it had been foreclosed on and sold.

Their attorney, John Heenan of the Billings firm Bishop and Heenan, said his clients were perplexed.

“They kind of wondered, well, how’s that, since we paid cash for it?” he said.

They had made the $50,000 cash payment to Deutsche Bank and then were told two years later that the house had been foreclosed on and sold to a company called MOM Haven 6 LLP.

They soon found out—Jason Norman worked in the mortgage business during their years in Austin—what had gone wrong: an error had been made on a quitclaim deed for a house in Butte that had been foreclosed on. That deed correctly listed the address of the house at 618 W. Platinum St., in Butte, but a legal description of the property, attached to the deed, described the property at 633 Howard that was owned outright by the Normans.

Because of the erroneous legal description, the deed was filed in Yellowstone County, and the Department of Revenue consequently transferred ownership of the house on Howard to MOM Haven 6. MOM Haven 6 had purchased 36 properties from Ocwen Loan Servicing, which was associated with Deutsche Bank.

In a pretrial “order and memorandum,” Judge Gustafson ruled on several motions in the case, meanwhile summarizing some of the facts in the case. In it, she said the erroneously prepared quitclaim deed had been signed by Robert Kaltenbach, a senior manager for Ocwen and attorney-in-fact for Deutsche Bank.

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This photo of the house on Howard, as it looked when the Normans bought it, was presented as evidence during the trial.

On April 9, 2013, MOM Haven 6 executed another quitclaim deed for the Howard property, which would have transferred the property back to the Normans, but they rejected it because it listed the company as an “LP” rather than the correct “LLP.”

Another quitclaim deed was prepared, but the Normans rejected it as well because it included language saying that the previous mistakes were the result of a “scrivener’s error.” Heenan said the language would have had the effect of leaving the bank blameless.

The Normans knew they wanted some kind of compensation because from the day they found out their house had been foreclosed on mistakenly, they had been effectively barred from doing anything with it.

They were denied the home equity loan they had originally applied for, and since they no longer had the deed to the house, they couldn’t list the home for sale and no property management company would consider renting it under the circumstances. And even though they figured the house needed only about three more weeks of trim work to be fully renovated, they couldn’t work on property they no longer owned.

There was also the difficulty of knowing that the house could be seized by the new owners at any time.

“We were just out of our minds with paranoia,” Jason Norman said.

All those considerations, and the fact that they weren’t making any money in Billings, prompted them to move back to Austin, where Jason went to work painting cars.

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Ed Kemmick/Last Best News

The house on Howard as it looks today.

As part of their legal battle against Deutsche Bank, the Normans were granted a motion for summary judgment for quiet title, and the bank signed a “disclaimer of interest” in the property on May 8, 2014. The trouble was, Heenan said, the bank did not actually record the disclaimer with the Yellowstone County clerk and recorder until August of this year.

At trial, Heenan maintained that the defendants’ actions, far from being merely a series of mistakes, constituted an intentional disregard of facts that were likely to cause injury to the Normans, and that “disregard or indifference” amounted to malice.

The 12-person jury agreed, and last Thursday it unanimously awarded the compensatory damages totaling $450,000, then went into deliberations again on Friday and unanimously awarded the punitive damages of $1.6 million.

Cal Stacey, the Billings attorney who represented Deutsche Bank, could not be reached for comment, but Heenan said he expects the bank to appeal the jury verdicts.

“They haven’t done anything voluntarily,” he said, “so I’d be surprised if they paid the jury verdict voluntarily.”

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Ed Kemmick/Last Best News

Liz and Jason Norman.

On Monday, for the first time since Nov. 20, 2012, the Normans did a little finish work inside the house on Howard, and they are hoping to complete the renovation in the coming weeks.

When they originally left Billings to move to Austin 20 years ago, they rented out the 750-square-foot home they owned on the 900 block of Howard. Later, after Jason’s grandmother died, they inherited her small house on the first block of Alderson Avenue.

During the trial, Heenan said, Deutsche Bank tried to portray them as out-of-staters and “land barons.” The defendants also tried to cast doubt on the Normans’ claims that they had renovated the old farmhouse at 633 Howard for just $40,000.

But it was true, Jason said with some pride.

“The house was built on Craigslist, yard sales and ReStore,” he said, referring to the Habitat for Humanity business that sells used building supplies and home furnishings.

When they came back to Billings from Austin, it was with the intention of trying to make a living flipping houses.

“We liked the idea of going into historic neighborhoods and buying historic houses and turning them into something charming,” Liz Norman said.

They really fell for the house on Howard. Jason said it was built in the 1890s as the center of a 110-acre dairy farm. It was in terrible shape, almost ready for a “D-8 Cat,” Jason said, but they wanted to salvage it.

They hired someone else to jack up the house and put in a new foundation, and they hired help to do some of the drywall, but they did everything else themselves. Liz said they worked virtually every day for 15 straight months on the house and then most of the time for another nine months before learning of the foreclosure.

Among the work they did on the house was to tear out the original maple floors, completely refinish the wood and reinstall the flooring. To make sure unusable pieces could be replaced with wood of the same vintage, they put in a section of different wood near the front door and used those pieces of maple for patching the rest of the floor.

They installed 19 windows, all of them used and some of them quite large, and they refinished a 1917 claw-foot bathtub from a tiny upstairs bathroom and put it in a downstairs bathroom. They also restored the front door, set into a frame flanked by windows. The doorway had a stamp on it saying “Billings Cabinet Co., 1887.”

And though they still have the possibility of an appeal hanging over their heads, at least now, after three years in limbo, they own the house again.

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