We don’t care if the Loan was Extinguished by Prior Payments, Foreclose on the Homeowner anyway

Among other theories, the borrowers in Shaver v. Barrett Daffin LLP  No. 14-20107 (Nov. 5, 2014, unpublished).

Shaver alleged that a servicer “was unjustly enriched by failing to apply credit default swap payments and other payments to their loan balance.”

This argument — apparently addressed for the first time by the Fifth Circuit in this opinion — was rejected by the Court, which noted similar results in other jurisdictions.

STEWART, CARL E.

JONES, EDITH H.

HIGGINSON, STEPHEN A.

Fifth Court Opinion (p.10)

The Shavers also claim that NCM was unjustly enriched by failing to apply credit default swap payments and other payments to their loan balance.

“A party may recover under the unjust enrichment theory when one person has obtained a benefit from another by fraud, duress, or the taking of an undue advantage.” Heldenfels Bros., Inc. v. City of Corpus Christi, 832 S.W.2d 39, 41 (Tex. 1992).

The Shavers fail to plausibly allege how the receipt of credit default payments or third-party insurance payments without an accompanying decrease to the loan balance is unjust enrichment.

The Shavers cite no cases holding that a lender must decrease the borrower’s loan balance by the amount received from third-party transactions, likely because no court has accepted this novel theory.

In fact, many courts have rejected similar claims based on a lender’s receipt of funds from credit default swaps and other comparable sources. See Rosas v. Carnegie Mortgage, LLC, No. CV 11-7692 CAS CWX, 2012 WL 1865480, at *8 (C.D. Cal. May 21, 2012) (“[P]laintiffs’ theory that lenders that received funds through loan securitizations or credit default swaps must waive their borrowers’ obligations fails as a matter of law.”); Taylor v. CitiMortgage, Inc., 2:10-CV-505 TS, 2010 WL 4683881, at *3 (D. Utah Nov. 10, 2010) (“[T]he separate contract that is the result of securitization does not free Plaintiffs from the terms agreed upon in the Deeds of Trust.”); Flores v. Deutsche Bank Nat’l Trust, Co., CIV. A. DKC 10-0217, 2010 WL 2719849, at *5 (D. Md. July 7, 2010) (dismissing a claim alleging that defendants lacked standing to enforce a note because they had already been compensated by credit enhancement policies).