Jaeger et al v. HSBC Bank USA, N.A. et al

Filing 29

ORDER granting 15 Motion to Dismiss. By Judge Robert E. Blackburn on 3/14/2013. (klyon, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Robert E. Blackburn
Civil Action No. 12-cv-01736-REB-KLM
LAWRENCE E. JAEGER, and
AMY P. JAEGER,
Plaintiffs,
v.
HSBC BANK USA, N.A., as Trustee for Wells Fargo Asset Securities Corporation, Mortgage
Pass-Through Certificate Series 2006-AR14, and
WELLS FARGO BANK, N.A.,
Defendants.
ORDER GRANTING MOTION TO DISMISS
Blackburn, J.
This matter is before me on the defendants’ Partial Motion To Dismiss [#15]1 filed
August 2, 2012. The plaintiffs filed a response [#17], and the defendants filed a reply [#25]. I
grant the motion.
I. JURISDICTION
I have jurisdiction over this case under 28 U.S.C. § 1332 (diversity).
II. STANDARD OF REVIEW
In considering a motion under Fed. R. Civ. P. 12(b)(6), I must determine whether the
allegations in the complaint are sufficient to state a claim within the meaning of Fed. R. Civ. P.
8(a). I must accept all well-pleaded allegations of the complaint as true. McDonald v. KinderMorgan, Inc., 287 F.3d 992, 997 (10th Cir. 2002). “However, conclusory allegations or legal
conclusions masquerading as factual conclusions will not suffice to prevent a motion to
dismiss.” Fernandez-Montes v. Allied Pilots Association, 987 F.2d 278, 284 (5th Cir. 1993);

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“[#15]” is an example of the convention I use to identify the docket number assigned to a
specific paper by the court’s electronic case filing and management system (CM/ECF). I use this
convention throughout this order.

see also Burnett v. Mortgage Elec. Registration Sys., Inc., ___ F.3d ___, ____, 2013 WL
386283, *2 - *3 (10th Cir. 2013); Ruiz v. McDonnell, 299 F.3d 1173, 1181 (10th Cir. 2002) (“All
well-pleaded facts, as distinguished from conclusory allegations, must be taken as true.”), cert.
denied, 538 U.S. 999 (2003). I review the challenged portion of a complaint to determine
whether it “‘contains enough facts to state a claim to relief that is plausible on its face.’” Ridge
at Red Hawk, L.L.C. v. Schneider, 493 F.3d 1174, 1177 (10th Cir. 2007) (quoting Bell Atlantic
Corp. v. Twombly, 550 U.S. 544, 570 (2007)); see also Ashcroft v. Iqbal, ___ U.S. ___, 129
S.Ct. 1937 (2009); Burnett., ___ F.3d ____, 2013 WL 386283, *2 - *3. “Thus, the mere
metaphysical possibility that some plaintiff could prove some set of facts in support of the
pleaded claims is insufficient; the complaint must give the court reason to believe that this
plaintiff has a reasonable likelihood of mustering factual support for these claims." Id.
(emphases in original).2 Nevertheless, the standard remains a liberal one, and “a well-pleaded
complaint may proceed even if it strikes a savvy judge that actual proof of those facts is
improbable, and that a recovery is very remote and unlikely.“ Dias v. City and County of
Denver, 567 F.3d 1169, 1178 (10th Cir. 2009) (quoting Twombly, 127 S.Ct. at 1965) (internal

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Twombly rejected and supplanted the “no set of facts” language of Conley v. Gibson, 355 U.S.
41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). The Tenth Circuit clarified the meaning of the “plausibility”
standard:
“plausibility” in this context must refer to the scope of the allegations in a
complaint: if they are so general that they encompass a wide swath of
conduct, much of it innocent, then the plaintiffs “have not nudged their
claims across the line from conceivable to plausible.” The allegations
must be enough that, if assumed to be true, the plaintiff plausibly (not just
speculatively) has a claim for relief.
This requirement of plausibility serves not only to weed out claims that do
not (in the absence of additional allegations) have a reasonable prospect
of success, but also to inform the defendants of the actual grounds of the
claim against them. “Without some factual allegation in the complaint, it
is hard to see how a claimant could satisfy the requirement of providing
not only ‘fair notice’ of the nature of the claim, but also ‘grounds' on which
the claim rests.”
Robbins v. Oklahoma, 519 F.3d 1242, 1247-48 (10th Cir. 2008) (quoting Twombly, 127 S.Ct. at 1974;
internal citations and footnote omitted).

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quotation marks omitted).
III. ALLEGATIONS
In 2006, the plaintiffs, Lawrence and Amy Jaeger, signed a promissory note and deed of
trust when they refinanced the debt on real estate they owned. ¶¶ 6 - 7.3 In 2008, the Jaegers
had an unexpected loss of income and unexpected legal expenses resulting from the decline of
the financial industry. ¶ 12. Prior to this time, Defendant Wells Fargo Bank, N.A. began
servicing the loan. ¶ 11. In late 2008, anticipating that they could not continue to make
payments as required by the promissory note, the Jaegers contacted Wells Fargo to request a
loan modification. ¶ 13. Wells Fargo noted that the loan was current, and told the Jaegers to
call back when they were 90 days delinquent. Id. The Jaegers did so. Id. Wells Fargo and the
Jaegers agreed to a two year temporary loan modification, and the Jaegers made payments
under the terms of the temporary modification while attempting to negotiate a permanent
modification. ¶¶ 14 - 15. At the end of the two year modification, the monthly payment
increased from 4,300 dollars to 8,800 dollars per month. ¶ 15.
During this time, Wells Fargo led the Jaegers to believe that a permanent modification of
their loan was imminent. ¶ 16. In December 2011, Wells Fargo told the Jaegers that a
permanent modification would be approved if the Jaegers paid an additional 25,000 dollars on
the loan. Id. The Jaegers provided documentation showing that they had 25,000 dollars
available to pay Wells Fargo. Id. Ultimately, Wells Fargo refused to modify the loan. Id.
Wells Fargo began foreclosure proceedings against the property by filing a case under
Rule 120 of the Colorado Rules of Civil Procedure (C.R.C.P.). On June 15, 2011, the Rule 120
court authorized a sale of the property by the Public Trustee. ¶ 17. The sale date later was
continued and rescheduled to permit the Jaegers and Wells Fargo to finalize a permanent loan
modification. Id. Ultimately, the foreclosure sale was completed on January 25, 2012. Id. “Up

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I refer to the complaint [#7] by paragraph number.

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until the morning of January 24, 2012, the Jaegers had been promised they would receive a
permanent modification on their loan. On the morning of January 24, 2012, Wells Fargo told the
Jaegers they would not stop the foreclosure sale as they had previously promised.” Id.
In their complaint, the Jaegers assert several claims against Wells Fargo. First, they
seek a judgment declaring that the defendants have “no standing or other interest in the Note
sufficient to foreclose the Note and Deed of Trust.” ¶ 22. They ask the court to vacate the order
approving the foreclosure sale. ¶ 24. Second, they assert a claim for wrongful, unlawful,
unconstitutional foreclosure. ¶¶ 26 - 33. Included in this claim are allegations that the Jaegers
never were provided with a copy of the motion for order authorizing sale under Rule 120, which
motion was filed in the foreclosure proceeding. ¶ 33. Third, they assert a claim for breach of
the covenant of good faith and fair dealing. ¶¶ 34 - 41. Included in this claim are allegations
that Wells Fargo acted as a fiduciary of the Jaegers during the effort to negotiate a loan
modification. Fourth, they allege that the defendants violated the Colorado Consumer
Protection Act. ¶¶ 42 - 45.4
In their motion, the defendants argue that the allegations in the complaint are not
sufficient to state claims for lack of notice under Rule 120 of the Colorado Rules of Civil
Procedure, breach of the covenant of good faith and fair dealing, breach of fiduciary duty, and
violation of the Colorado Consumer Protection Act. I agree and I grant the motion to dismiss as
to these claims.
IV. ANALYSIS
A. Failure To Provide Notice of Rule 120 Proceeding
Under C.R.C.P. 120(b), notice of a Rule 120 foreclosure proceeding must be provided in
certain ways.

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The format of the complaint [#7] indicates that the consumer protection act claim is a sub-set of
the covenant of good faith and fair dealing claim. However, I read the consumer protection act allegations
to assert a claim independent of the covenant of good faith and fair dealing claim.

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Such notice shall be served by the moving party not less than 14 days prior to
the date set for the hearing, by: (1) mailing a true copy thereof to each person
named in the motion (other than persons for whom no address is stated) at the
address or addresses stated in the motion; (2) and by filing a copy with the clerk
and by delivering a second copy to the clerk for posting by the clerk; and (3) if a
residential property as defined by statute, by posting a true copy in a
conspicuous place on the subject property as required by statute. Such mailing
and delivery to the clerk for posting shall be evidenced by the certificate of the
moving party or moving party's agent.
C.R.C.P. 120(b).
In the Jaeger’s foreclosure proceeding, the defendants provided notice as required by
Rule 120. Motion [#15], exhibits F & G.5 “Properly addressed foreclosure
notices are presumed to reach the addressee.” Bd. of Cnty. Comm’ns v. Park Cnty.
Sportsmen’s Ranch, LLP, 271 P.3d 562, 576 (Colo. App. 2011) (citing Stark Lumber Co. v.
Keystone Inv. Co., 20 P.2d 306, 307 (Colo. 1933)). “(T)he law presumes delivery of a properly
addressed piece of mail.” Moya v. U.S., 35 F.3d 501, 504 (10th Cir. 1994). Nothing in the
allegations of the complaint tends to rebut this presumption. Although the Jaegers make a
conclusory allegation that they were not provided copies of the motion for order authorizing sale
or the order authorizing sale, ¶ 33, they do not provide specific factual allegations which
substantiate this claim. Rather, the allegations in the complaint show that the Jaegers had
actual notice of the pending foreclosure proceedings. See, e.g., ¶ 17 (sale date continued to
allow time for further negotiations by the Jaegers and Wells Fargo). Therefore, the motion to
dismiss must be granted as to the Jaeger’s claim that they were not provided proper notice of
the Rule 120 proceeding.
B. Breach of Covenant of Good Faith and Fair Dealing
According to the Jaegers, Wells Fargo told the Jaegers that a permanent modification

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In their complaint, the Jaegers refer to various documents used in the Rule 120 proceeding, and
claim a lack of notice. Exhibits F & G concern notice given to the Jaegers and others. If a document is
referenced in or attached to the complaint and is central to plaintiff's claims, I may consider an indisputably
authentic copy of the document in resolving a motion to dismiss. See GFF Corp. v. Associated
Wholesale Grocers, Inc., 130 F.3d 1381, 1384-85 (10th Cir. 1997). Thus, I may consider Exhibits F & G
without converting the motion to dismiss to a motion for summary judgment.

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would be approved if the Jaegers paid an additional 25,000 dollars on the loan. ¶ 37. The
Jaegers provided documentation showing that they had 25,000 dollars available to pay Wells
Fargo, but, ultimately, Wells Fargo proceeded with the foreclosure. Id. The Jaegers claim this
constitutes a breach of the covenant of good faith and fair dealing.
This claim is based on alleged oral representations that are not enforceable under
Colorado’s Credit Agreement Statute of Frauds, §38-10-124, C.R.S. This statute provides:
[N]o debtor or creditor may file or maintain an action or a claim relating to
a credit agreement involving a principal amount in excess of twenty-five
thousand dollars unless the credit agreement is in writing and is signed by
the party against whom enforcement is sought.
§38-10-124(2), C.R.S. The term “credit agreement” includes “[a] contract, promise, undertaking,
offer, or commitment to lend, borrow, repay, or forbear repayment of money, to otherwise
extend or receive credit . . .” and “[a]ny representations and warranties made or omissions in
connection with the negotiation, execution, administration, or performance of, or collection of
sums due under, any [] credit agreement[].” §38-10-124(1)(a), C.R.S. The loan amount at issue
here exceeded one million dollars. Motion [#15], exhibit A (promissory note). Nothing in the
complaint indicates that the defendants’ alleged assurance that a permanent loan modification
would be approved was an assurance memorialized in writing. ¶¶ 36 - 37. In the context of the
note and deed of trust at issue here, an alleged oral assurance may not be the basis of a claim
under Colorado law.
To the extent the Jaegers allege a breach of the covenant of good faith and fair dealing
based on the written terms of their agreements with the defendants, this claim also fails. Under
Colorado law, every contract
contains an implied duty of good faith and fair dealing, requiring the parties to the
agreement to perform their contractual obligations in good faith and in a
reasonable manner. The purpose of the duty is to effectuate the intentions of the
parties or to honor their reasonable expectations as expressed in their
agreement.
However, the duty may be relied upon only when one party has

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discretionary authority to perform certain contract terms, including discretionary
acts, in good faith. Thus, a breach of the duty occurs when one party uses
discretion conferred by the contract to act dishonestly or to act outside the scope
of accepted commercial practices to deprive the other party of the benefit of the
contract.
O'Reilly v. Physicians Mut. Ins. Co., 992 P.2d 644, 646 (Colo. App. 1999) (citations omitted).
None of the allegations in the complaint shows that the defendants had discretionary
authority under the terms of the note, the deed of trust, or the temporary loan modification
agreement. None of the allegations in the complaint indicates that the defendants used
discretion conferred by the note, the deed of trust, or the temporary loan modification agreement
to act dishonestly or to act outside of accepted commercial practices to deprive the Jaegers of
the benefit of their contracts. Therefore, the motion to dismiss must be granted as to the
Jaeger’s claim that the defendants breached the covenant of good faith and fair dealing.
C. Breach of Fiduciary Duty
Factually, this claim is based solely on alleged oral representations by the defendants to
the Jaegers. Given the clear limitations of the Credit Agreement Statute of Frauds, §38-10-124,
C.R.S., oral representations may not be the basis of this claim. The motion to dismiss must be
granted as to this claim.
Even if oral representations could be the basis of this claim, I conclude that the
allegations in the complaint are not sufficient to state a claim for breach of fiduciary duty. The
term fiduciary means person who is “required to act for the benefit of another person on all
matters within the scope of their relationship; one who owes to another the duties of good faith,
trust, confidence, and candor” or “one who must exercise a high standard of care in managing
another's money or property.” Black's Law Dictionary (9th ed. 2009). Generally, a money
lender is not considered to be a fiduciary because the lender is engaging in a transaction
primarily to benefit itself, not the borrower. First Nat. Bank of Meeker v. Theos, 794 P.2d
1055, 1060 (Colo. App. 1990). However, a confidential relationship can be formed when one

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party occupies a superior position over another and, as a result, has the opportunity to use that
superiority to his advantage over the other. Id. at 1061; United Fire & Casualty Co. v. Nissan
Motor Corp., 433 P.2d 769 (Colo. 1967). The party claiming the existence of a confidential
relationship “must show that he justifiably reposed a special trust or confidence in the other to
act in the claimant’s interest” and “that the other party either invited or ostensibly accepted the
trust imposed.” Id.
In the complaint, the Jaegers have not alleged any statements or documents
which established a basis for them justifiably to repose a special trust or confidence in the
defendants. Essentially, the defendants agreed to lend money to the Jaegers. When the
Jaegers were unable to pay the debt as agreed originally, the parties made some effort to agree
to an alternative arrangement. The Jaegers allege one or both defendants assured them that
an alternative could be found. In this context, such assurances are not a reasonable basis for
the Jaegers to repose special trust and confidence in their mortgage lender. Thus, even if the
alleged oral representations of the defendants are considered, the allegations in the complaint
are not sufficient to state a breach of fiduciary duty claim.
D. Colorado Consumer Protection Act
A fundamental element of a claim under the Colorado Consumer Protection Act (CCPA)
is that the challenged practice significantly impacts the public as actual or potential consumers
of the defendant’s goods, services, or property. Rhino Linings United States v. Rocky Mt.
Rhino Lining, 62 P.3d 142, 146 - 47 (Colo. 2003). The allegations in the complaint describe an
impact allegedly suffered by the Jaegers, but nothing in the complaint indicates or implies that
the defendants’ practices had any significant impact on the public. The allegations in the
complaint are not sufficient to state a claim under the CCPA.
VI. CONCLUSION & ORDERS
The allegations in the plaintiffs’ complaint [#7] are not sufficient to state a claim for

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failure to provide notice in a proceeding under C.R.C.P. 120(b), for breach of the covenant of
good faith and fair dealing, for breach of fiduciary duty, or for violation of the Colorado
Consumer Protection Act. The defendants move to dismiss the complaint as to each of these
four claims. The motion to dismiss is granted.
THEREFORE, IT IS ORDERED as follows:
1. That under FED. R. CIV. P. 12(b)(6), the defendants’ Partial Motion To Dismiss
[#15] filed August 2, 2012, is GRANTED;
2. That under FED. R. CIV. P. 12(b)(6), the plaintiffs’ claims for failure to provide notice in
a proceeding under C.R.C.P. 120(b), for breach of the covenant of good faith and fair dealing,
for breach of fiduciary duty, and for violation of the Colorado Consumer Protection Act, as
alleged in the complaint [#7], are DISMISSED for failure to state a claim on which relief can be
granted.
Dated March 14, 2013, at Denver, Colorado.
BY THE COURT:

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