Baginski v. JPMorgan Chase Bank N A
Filing
37
MEMORANDUM OPINION Signed by the Honorable John F. Grady on November 29, 2012. Mailed notice(cdh, )
11-2209.121-RSK
November 29, 2012
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
MARIAN BAGINSKI,
)
)
)
)
)
)
)
)
)
Plaintiff,
v.
JP MORGAN CHASE BANK N.A.,
Defendant.
No. 11 C 6999
MEMORANDUM OPINION
Before the court is defendant JP Morgan Chase Bank, N.A.’s
(“Chase”) motion to dismiss plaintiff Marian Baginski’s amended
complaint.
For the reasons explained below, we grant Chase’s
motion in part and deny it in part.
BACKGROUND
Plaintiff Marian Baginski’s pro se complaint alleges that
Chase required him to make excessive escrow payments and then
breached its agreement to grant him a permanent loan modification.
Baginski obtained a home loan from Washington Mutual Bank (“WaMu”)
in 2006.
(Am. Compl. ¶ 1.)
Chase acquired the loan when it
purchased WaMu’s assets on September 25, 2008.
(Id. at ¶ 8.)
The
parties’ dispute began in December 2009 when Chase sent Baginski a
letter informing him that he would have to begin making escrowaccount payments for insurance and tax purposes. (Id. at ¶ 24; see
also id. at ¶ 1.)
WaMu had not required Baginski to maintain an
- 2 -
escrow
account,
and
the
escrow
payments
that
Chase
demanded
significantly exceeded Baginski’s yearly payments for taxes and
insurance.
(See id. at ¶ 1; see also Letter from Baginski to
Chase, dated February 2, 2011, attached as Ex. 2 to Chase’s Mem.)
Baginski’s pro se complaint is difficult to parse, but we gather
that he continued to make monthly mortgage payments to Chase in the
amounts he had paid before Chase instituted the escrow requirement.
(See Letter from Baginski to Chase, dated February 2, 2011 (“Chase
Bank started to send me monthly payments $3,4,5, thosends [sic] for
one month, but I paid usual monthly payments in sum of $1164.01.”);
see also Am. Compl. ¶ 2.)
Chase later accused Baginski of failing
to make payments between June 2010 and October 2010.
¶ 2.)
(Am. Compl.
Baginski alleges that he did make payments, at least in the
pre-escrow-requirement amounts.
(See id. (“Marian Baginski paid
monthly installments each month before due date and his obligations
for real estate taxes and insurance.”).)
On October 18, 2010,
Chase threatened to foreclose Baginski’s home if he failed to pay
the loan in full, with penalties.
(Id.)
In late 2010, Baginski sought a loan modification.
(Id. at ¶
35.) Before discussing Baginski’s allegations, a brief overview of
the Home Affordable Mortgage Program (“HAMP”) will be helpful.
“The U.S. Department of the Treasury implemented HAMP to help
homeowners avoid foreclosure amidst the sharp decline in the
nation’s housing market in 2008.” Wigod v. Wells Fargo Bank, N.A.,
- 3 -
673 F.3d 547, 554 (7th Cir. 2012).
In connection with this
legislation, the Secretary of the Treasury “negotiated Servicer
Participation Agreements (SPAs) with dozens of home loan servicers
. . . .
Under the terms of the SPAs, servicers agreed to identify
homeowners who were in default or would likely soon be in default
on their mortgage payments, and to modify the loans of those
eligible under the program.”
Id. at 556.
Servicers determine a
homeowner’s eligibility by following a “three-step process:” (1)
the
servicer
determines
whether
the
borrower
meets
certain
threshold requirements for modification under HAMP (e.g., the loan
must have originated before January 1, 2009); (2) the servicer
calculates
a
modification
using
criteria
imposed
by
Treasury
Department regulations; and (3) the servicer applies a Net Present
Value (NPV) test “to assess whether the modified mortgage’s value
to the servicer would be greater than the return on the mortgage if
unmodified.”
Id. at 556-57.
If “the value of the modified
mortgage would be lower than the servicer’s expected return after
foreclosure,”
modification.
then
the
servicer
Id. at 557.
is
not
required
to
offer
a
If the value of the modified loan
exceeds the projected return after a foreclosure, then the servicer
must offer a modification.
Id.
After determining that a borrower
is eligible, the servicer implements “a Trial Period Plan (TPP)
under the new loan repayment terms . . . .”
Id.
If the borrower
- 4 -
complies with the terms of the TPP, then the servicer must offer a
permanent modification.
Id.
Baginski alleges that he and Chase entered into some form of
agreement concerning a loan modification:
Plaintiff[] entered into an oral MAKING HOME AFFORDABLE
(MHA) contract with JPMorgan regarding the loan serviced
by [sic] JPMorgan made an oral and written commitment
offer to Plaintiff on or about December 01.2010.
Plaintiff formed a binding, enforceable agreement with
JPMorgan when he delivered all the documents requested by
the Defendant.
(Id. at ¶ 35.)
However, the nature of the parties’ alleged
agreement is unclear. Some of the complaint’s allegations indicate
that the parties entered into a TPP agreement, (see id. at ¶¶ 36,
47), and that Chase breached that agreement by failing to grant
Baginski a permanent loan modification.
(Id. at ¶ 37.)
Other
allegations suggest that Baginski’s loan-modification request never
made it past the eligibility-determination stage.
(See, e.g., id.
at ¶¶ 52(e) (Chase failed “to respond, or respond in a timely
manner, to [Baginski’s] request to be evaluated for a modification
under HAMP, even after [he] provided all information requested by
JP Morgan”); 52(g) (Chase failed “to properly determine whether
[Baginski] qualified for HAMP modifications by checking investor
restrictions and/or performing an NPV test”); 52(n) (Chase told
Baginski “that [he] qualified for a trial period plan, then
fail[ed] to send an official trial plan agreement.”).
Part of the
confusion stems from the fact that Baginski appears to have
- 5 -
incorporated HAMP allegations from another case that may or may not
be relevant to his particular claim.
(See, e.g., id. at ¶ 52(d)
(one of several allegations referring to “Plaintiffs,” plural).)
Baginski also alleges that Chase did not provide substantive
responses to his inquiries concerning the status of his loan.
On
February 2, 2011, Baginski sent what he identified as a “qualified
written request” (“QWR”) to Chase stating his belief that his “loan
account was in error.”
(Id. at ¶ 25); see also Real Estate
Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2605(e).
“RESPA
is a consumer protection statute that regulates the real estate
settlement process, including servicing of loans and assignment of
those loans.” Catalan v. GMAC Mortg. Corp., 629 F.3d 676, 680 (7th
Cir.
2011).
Among
other
requirements,
RESPA
requires
loan
servicers to “respond promptly to borrowers’ written requests for
information.”
Id.
Baginski received a response from Chase
acknowledging his February 2, 2011 letter on February 23, 2011,
(see Am. Compl. ¶ 25), and he received a second letter from Chase
on March 20, 2011.
(See id. at ¶ 29.)
But he contends that
neither response adequately addressed the issues he raised in his
letter.
(See id. at ¶ 73; see also 12 U.S.C. § 2605(e) (2)
(requiring servicers to investigate a borrower’s complaint and make
corrections to the borrower’s account, or else explain why it
believes that corrections are not warranted).
Baginski alleges
that he sent a second QWR to Chase on February 14, 2011.
(Id. at
- 6 -
¶ 69.)
However, he does not describe the substance of this second
letter,1 and he alleges that Chase acknowledged receiving the
letter on a nonsensical date (January 6, 2010).
(See id. ¶¶ 69,
72.)2
DISCUSSION
Baginski’s five-count complaint asserts claims for breach of
contract (Count I), breach of the covenant of good faith and fair
dealing (Count II), “deceit and/or negligent misrepresentation”
(Count III), negligence (Count IV), RESPA violations (Count V), and
mail fraud (Count VI). Chase has moved to dismiss the complaint in
its entirety.
A.
Legal Standard
The purpose of a 12(b)(6) motion to dismiss is to test the
sufficiency of the complaint, not to resolve the case on the
1/
At paragraph 26 of his complaint, Baginski alleges that he sent a
“DODD-FRANK CERTIFICATION” to Chase on February 14, 2011. (Am. Compl. ¶ 26.)
This allegation refers to Baginski’s obligation to certify that he has not been
convicted of any real-estate related crimes in order to be eligible for relief
under the Making Home Affordable Program. See 12 U.S.C. § 5220b(d) (individuals
convicted of real-estate related crimes within the last 10 years are ineligible
to receive assistance under the Making Home Affordable Program); U.S. Dep’t of
the Treasury, Home Affordable Modification Program Supp. Directive 10-11 (Sept.
21, 2010) (imposing the certification requirement). If Baginski’s Dodd-Frank
certification is the letter that he refers to at paragraph 69 of his complaint,
then it is not a QWR under RESPA. See 12 U.S.C. § 2605(e)(1)(B) (a QWR “(i)
includes, or otherwise enables the servicer to identify, the name and account of
the borrower; and (ii) includes a statement of the reasons for the belief of the
borrower, to the extent applicable, that the account is in error or provides
sufficient detail to the servicer regarding other information sought by the
borrower”).
2/
Baginski’s complaint refers to other letters, (see Am. Compl. ¶¶ 28,
31, 70), but as far as we can tell he has not based his RESPA claim on Chase's
response (or lack thereof) to these letters. (See id. at ¶ 69 (alleging that
Baginski sent two QWRs to Chase, dated February 2 and February 14,
respectively).)
- 7 -
merits.
5B Charles Alan Wright & Arthur R. Miller, Federal
Practice and Procedure § 1356, at 354 (3d ed. 2004).
To survive
such a motion, “a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on
its face.’
A claim has facial plausibility when the plaintiff
pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.”
Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (citing Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570, 556 (2007)).
When evaluating
a motion to dismiss a complaint, the court must accept as true all
factual allegations in the complaint.
However,
we
need
not
accept
as
Iqbal, 129 S. Ct. at 1949.
true
its
legal
conclusions;
“[t]hreadbare recitals of the elements of a cause of action,
supported by mere conclusory statements, do not suffice.”
Id.
(citing Twombly, 550 U.S. at 555).
The court has a special responsibility to construe a pro se
complaint liberally and to “take appropriate measures to permit the
adjudication of pro se claims on the merits, rather than to order
their dismissal on technical grounds.”
Donald v. Cook County
Sheriff’s Dep’t, 95 F.3d 548, 555 (7th Cir. 1996); see also
Castillo v. Cook County Mail Room Dep’t, 990 F.2d 304, 307 (7th
Cir. 1993) (stating that a pro se complaint, “however inartfully
pleaded,”
should
be
liberally
construed).
Accordingly,
when
reviewing a pro se complaint, the court must employ standards less
- 8 -
stringent than if the complaint had been drafted by counsel.
Antonelli v. Sheahan, 81 F.3d 1422, 1427 (7th Cir. 1996); Curtis v.
Bembenek, 48 F.3d 281, 283 (7th Cir. 1995) (both citing Haines v.
Kerner, 404 U.S. 519, 520 (1972)).
B.
Breach of Contract (Count I)
Baginski has articulated two theories in support of his
breach-of-contract claim, one of which we can quickly dispense
with.
Baginski asserts in his complaint that he is a third-party
beneficiary of the SPA between Chase and Fannie Mae.
Compl. ¶¶ 40-46, 48.)
(See Am.
In Wigod, our Court of Appeals clearly
stated (albeit in dicta) that borrowers cannot sue for breach of an
SPA because Congress did not create a private right of action under
HAMP.
See Wigod, 673 F.3d at 559 n.4 (“Congress did not create a
private right of action to enforce the HAMP guidelines, and since
[Astra USA, Inc. v. Santa Clara County, 131 S.Ct. 1342 (2011)]
district courts have correctly applied the Court’s decision to
foreclose
claims
by
homeowners
seeking
third-party beneficiaries of SPAs.”).
HAMP
modifications
as
Applying Wigod, Baginski’s
third-party-beneficiary theory is not viable.
Baginski’s second theory is that he entered into a TPP
contract
with
Chase,
which
permanently modify his loan.
the
bank
breached
by
(See Am. Compl. ¶ 37.)
failing
to
In Wigod, our
Court of Appeals held that a borrower could sue for breach of a TPP
contract under state law, notwithstanding the absence of a private
right of action under HAMP.
See Wigod, 673 F.3d at 560-66.
The
- 9 -
fact
that
the
plaintiff’s
TPP
agreement
incorporated
requirements was no impediment to her suit.
HAMP’s
See id. at 581-85
(rejecting the theory that a claim for breach of a TPP agreement is
an impermissible end run around HAMP).
Applying these principles,
the Court concluded that the plaintiff had stated a claim for
breach of contract based upon her allegation that the defendant had
failed to offer her a permanent loan modification even though she
had complied with all TPP conditions.
See id. at 561-66.
Some of
Baginski’s allegations indicate that he is pursuing a claim along
the lines suggested by Wigod.
we
discussed
before,
the
(See Am. Compl. ¶¶ 36, 47.)
complaint
also
contains
But as
allegations
suggesting that the parties never executed a TPP agreement.
id. at ¶ 52.)
(See
Chase construes the complaint to allege that
Baginski merely submitted a request for a loan modification, one
that Chase did not approve.
(See Chase’s Mem. at 5.)
agree with Chase that Wigod
We tend to
is distinguishable if Chase and
Baginski never entered into a TPP agreement.
But see Wigod, 673
F.3d at 566 (concluding that the plaintiff had adequately pled a
claim for promissory estoppel in the alternative to her claim for
breach of contract).
But given Baginski’s pro se status, we will
construe the ambiguities in his complaint in his favor.3
The
complaint alleges that the parties entered into a TPP contract and
3/
This is a closer call because Baginski’s response brief does not
address Chase’s interpretation of his complaint. However, because Baginski is
proceeding pro se, we will not construe his silence to mean that he agrees with
Chase that there was no TPP agreement.
- 10 -
that Chase breached that contract by failing to offer a permanent
loan modification despite Baginski’s compliance with the contract’s
requirements.
(See Am. Compl. ¶¶ 35-39.)
The facts may not bear
out these allegations, but that is a matter for summary judgment.
Chase’s motion to dismiss is denied as to Count I.
C.
The Duty of Good Faith and Fair Dealing (Count II)
Count II of Baginski’s complaint alleges that Chase breached
its duty of good faith and fair dealing.
54.)
(See Am. Compl. ¶¶ 51-
The duty of good faith and fair dealing is an interpretive
tool that informs the court’s interpretation of the contracting
parties’
intent.
See
Playboy
Enterprises
Intern.,
Inc.
v.
Smartitan (Singapore) Pte Ltd., No. 10–cv–4811, 2011 WL 3839711, *2
(N.D. Ill. Aug. 26, 2011).
action.
It is not an independent cause of
See id.; see also Zeidler v. A & W Restaurants, Inc., 301
F.3d 572, 575 (7th Cir. 2002) (“[W]e note that the district court
correctly dismissed on the pleadings the [plaintiffs’] remaining
claim that [the defendant] breached an independent covenant of good
faith
and
fair
dealing.
The
covenant
is
only
an
aid
to
interpretation, not a source of contractual duties or liability
under Illinois law.”).
D.
Count II is dismissed with prejudice.
“Deceit and/or Negligent Misrepresentation” (Count III)
Insofar as Count III alleges fraud in connection with WaMu’s
decision to grant Baginski a loan, (see, e.g., Am. Compl. ¶ 56,
57(b), 58), that claim is barred by the Purchase and Assumption
- 11 -
Agreement between Chase and the FDIC pursuant to which Chase
acquired
WaMu’s
assets.4
Section
2.5
of
the
Purchase
and
Assumption Agreement broadly excludes borrower claims from the
liabilities
assumed
by
Chase.
(See
Purchase
and
Assumption
Agreement, attached as Ex. 1 to Chase’s Mem., § 2.5); see also
Yeomalakis v. F.D.I.C., 562 F.3d 56, 60 (1st Cir. 2009) (construing
the same provision to prohibit a plaintiff from substituting Chase
as a defendant in a lawsuit originally filed by a borrower against
WaMu).
So, even assuming that Baginski has adequately alleged
fraud by WaMu, he cannot pursue that claim against Chase. However,
Baginski also alleges that Chase “intentionally or negligently
misrepresented to [him] that he was still on a trial modification
plan, when in fact[,] [his] modified payments were being recorded
as insufficient.”
(Am. Comp. ¶ 59.)
This claim, which is based on
Chase’s alleged misrepresentation after it acquired Baginski’s
loan, is not barred by § 2.5.
And Chase has not articulated any
other basis to dismiss this claim.
Therefore, Chase’s motion to
dismiss is denied as to Count III.
E.
Negligence (Count IV)
Count IV of Baginski’s complaint alleges that “WaMu had a duty
to investigate the reasonableness of [Baginski’s] stated income and
4/
We may consider the Purchase and Assumption Agreement without
converting Chase’s motion to dismiss into a motion for summary judgment because
the complaint expressly refers to, and relies on, that document. (See Am. Compl.
¶¶ 21-22); see also Minch v. City of Chicago, 486 F.3d 294, 300 n.3 (7th Cir.
2007).
- 12 -
[to] confirm that [he] had the ability to repay the loan.”
Compl. ¶ 64.)
(Am.
For the reasons we just discussed, this claim is
barred by § 2.5 of the Purchase and Assumption Agreement. Count IV
is dismissed with prejudice.
F.
RESPA Violations (Count V)
After receiving a QWR from a borrower, a loan servicer has 20
days to send a written response acknowledging the correspondence.
See 12 U.S.C. § 2605(e)(1)(A).
Within 60 days after receiving a
QWR, “the servicer must take one of three actions: either (1) make
appropriate corrections to the borrower’s account and notify the
borrower
in
borrower’s
writing
account
of
and
the
corrections;
provide
the
(2)
borrower
investigate
with
a
the
written
clarification as to why the servicer believes the borrower’s
account to be correct; or (3) investigate the borrower’s account
and
either
provide
the
requested
information
or
provide
an
explanation as to why the requested information is unavailable.”
Catalan, 629 F.3d at 680 (citing 12 U.S.C. § 2605(e)(2)(A), (B),
and (C)).
During this 60-day period, “a servicer may not provide
information regarding any overdue payment, owed by such borrower
and relating to such period or qualified written request, to any
consumer reporting agency.”
12 U.S.C. § 2605(e)(3).
Chase argues
that Baginski’s February 2, 2011 letter did not qualify as a QWR,
therefore
triggered.
its
obligation
to
respond
under
§
2605
was
never
See Catalan, 629 F.3d at 680 (“[I]t takes a ‘qualified
- 13 -
written request’ to trigger the loan servicer’s duties under RESPA
to acknowledge and respond.”).
It relies on cases from other
jurisdictions that have applied a relatively strict interpretation
of § 2605(e)(1)(B)’s requirements.
(See Chase’s Mem. at 10.)
However, our Court of Appeals has interpreted the statute less
restrictively.
See Catalan, 629 F.3d at 686-87.
As we read
Baginski’s letter, he was complaining about “errors” related to his
account: (1) Chase required him to make escrow payments, whereas
WaMu had not required him to do so; (2) the escrow payments that
Chase demanded were excessive; (3) Chase failed to apply his
monthly mortgage payments correctly and then contacted a credit
bureau concerning the missed payments; and (4) Chase stopped
accepting payments from him.
dated February 2, 2011.)
(See Letter from Baginski to Chase,
It is true that Baginski’s letter
requests reinstatement rather than specific information about his
account, but we think it sufficiently describes alleged “errors” to
constitute a QWR.
See 12 U.S.C. § 2605 (A QWR “includes a
statement of the reasons for the belief of the borrower, to the
extent applicable, that the account is in error
or
provides
sufficient detail to the servicer regarding other information
sought by the borrower.”) (emphasis added).
In
the
alternative,
Chase
argues
that
the
complaint’s
allegations demonstrate that it complied with RESPA.
Baginski
alleges that Chase acknowledged his February 2 letter on February
- 14 -
23, 2011, (see Am. Compl. ¶ 25), within the 20-day period that the
statute imposes.
See 12 U.S.C. § 2605(e)(1)(A) (requiring written
acknowledgment within 20 days of receipt, “excluding legal public
holidays, Saturdays, and Sundays”).
He also alleges that he
received a second letter from Chase within the 60-day period
imposed by § 2605(e)(2):
On, or about March 20.2011 Mr. Larry Thode in the name of
the Defendant mentioned about loan modification process
and “again to request the escrow account waiver” and
about “a suspense account until enough funds are
available to make the scheduled payment amount due.”
(Id. at ¶ 29.)
This allegation appears to indicate that Chase’s
letter was responsive to the subject-matter of Baginski’s QWR. But
Baginski alleges elsewhere in the complaint that Chase did not
resolve the escrow issue, either by reducing or eliminating the
escrow requirement or by explaining why it was unwilling to do so.
(See id. at ¶ 73 (“Defendant JP Morgan thus violated RESPA by
failing to make appropriate corrections to [Baginski’s] escrow
account in response to any of [his] QWRs, or to investigate or to
explain why it would or could not do so.”); cf. 12 U.S.C. §
2605(e)(2)(A)-(C). It may be that Chase acted within its rights by
imposing
the
escrow
requirement,
and
that
its
response
to
Baginski’s QWR was appropriate under the circumstances.
However,
those issues will require more factual development.
Chase’s
motion to dismiss is denied as to Count V.
G.
Mail Fraud (Count VI)
- 15 -
Baginski alleges that he contacted the Illinois Attorney
General
in
March
2011,
apparently
(See Am. Compl. ¶ 3.)
conduct.
to
complain
about
Chase’s
Then in August 2011, Chase sent a
letter to the Attorney General stating that Baginski’s loan was
“currently in active litigation.”
(Id. at ¶¶ 3, 30, 33, 79.)
As
far as we can tell, Baginski believes that this statement was false
because
Chase
had
notified
him
on
June
27,
2011
foreclosure proceedings against him had been “stopped.”
30.)
that
the
(Id. at ¶
Baginski claims that Chase’s statement violated the criminal
mail fraud statute. (See Am. Compl. ¶ 79.) First, Baginski cannot
sue directly under the mail-fraud statute: this is a civil action
for damages, not a criminal prosecution. Mail fraud may constitute
“predicate acts of racketeering” for purposes of a civil RICO
claim, Midwest Grinding Co., Inc. v. Spitz, 976 F.2d 1016, 1019
(7th Cir. 1992), but Baginski has not attempted to allege such a
claim.
See id. (“The elements of a RICO violation consist of (1)
conduct
(2)
of
an
enterprise
(3)
through
a
pattern
(4)
of
racketeering activity.”) (citation and internal quotation marks
omitted).
Second, it is unclear how Baginski believes he was
injured by Chase’s alleged statement to the Illinois Attorney
General.
He generally alleges that he “suffered actual damages,
including but not limited to devastation of his credit, monetary
damages, health deterioration, and threatened foreclosure of his
home.”
(Id. at ¶ 80.)
But he does not allege that, in reliance on
- 16 -
Chase’s statement, the Attorney General acted (or failed to act) in
a way that harmed his interests.
Count VI is dismissed with
prejudice.
CONCLUSION
The defendant’s motion to dismiss [28] is granted in part and
denied in part.
The motion is granted as to Counts II, IV, and VI;
those counts are dismissed with prejudice.
is otherwise denied.
The defendant’s motion
A status hearing is set for December 5, 2012
at 11:00 a.m.
DATE:
November 29, 2012
ENTER:
___________________________________________
John F. Grady, United States District Judge
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?