Swanson et al v. GMAC Mortgage et al
Filing
46
ORDER granting 36 Motion to Dismiss(Written Opinion). Signed by Senior Judge David S. Doty on 4/3/2012. (PJM)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Civil No. 11-944(DSD/JSM)
Daniel M. Swanson and
Karla J. Swanson,
Plaintiffs,
ORDER
v.
GMAC Mortgage, LLC, North
American Banking Company,
Electronic Registration
Systems, Inc. and Federal
National Mortgage Association,
Defendants.
Christopher P. Parrington, Esq., Andrew S. Dosdall, Esq.,
Patrick D. Boyle, Esq. and Skjold Parrington, PA, 222
South Ninth Street, Suite 3220, Minneapolis, MN 55402 and
Amoun Vang Sayaovong, Esq. and Legal Solutions LLC, 150
Eaton Street, Suite 105, St. Paul, MN 55107, counsel for
plaintiffs.
Donald G. Heeman, Esq., Randi J. Winter, Esq. and
Felhaber, Larson, Fenlon & Vogt, P.A., 220 South Sixth
Street, Suite 2200, Minneapolis, MN 55402, counsel for
defendants
GMAC
Mortgage, Electronic Registration
Systems, Inc. and Federal National Mortgage Association.
This matter is before the court upon the motion to dismiss by
defendants
GMAC
Mortgage,
LLC
(GMAC),
Electronic Registration
Systems, Inc.1 and Federal National Mortgage Association.2
1
It appears that plaintiffs intended
Electronic Registration Systems as a party.
2
to
add
Based
Mortgage
Plaintiffs also named North American Banking Company as a
party, but did not serve this defendant.
on a review of the file, record and proceedings herein, and for the
following reasons, the court grants the motion.
BACKGROUND
This mortgage-loan dispute arises out of a promissory note
(Note) and mortgage executed on February 21, 2008, by plaintiffs
Daniel M. Swanson and Karla J. Swanson for property located at 1112
Superior Drive, Northfield, Minnesota 55057.
Am. Compl. ¶¶ 6-7.
The Note had a principal value of $328,000.
See id. ¶ 8.
The
Swansons made monthly payments of $2,378.23 until summer 2008. See
id. ¶ 12.
Financial hardship caused the Swansons to fall behind on
their payments, whereupon they entered into a forbearance agreement
(FA) with GMAC in fall 2008.
See id. Ex. A.
The FA required the
Swansons to make four monthly payments of $2,649.06 from October
2008 through January 2009.
“[u]pon
completion
of
Id. ¶ 16.
the
The Swansons agreed that
forbearance,
the
consider options to bring the loan current.”
Servicer
[would]
Id. Ex. A.
The
Swansons also agreed that the FA did “not constitute a waiver of
the acceleration, a wavier of the right of the Servicer to enforce
the mortgage, or a waiver of the right to complete the existing
foreclosure proceedings.”
Id.
In November 2008, GMAC instructed
the Swansons to stop making FA payments, because their November
payment was received late.
Id. ¶ 24.
2
Thereafter, the Swansons applied for a loan modification. See
id. ¶ 28.
On February 19, 2010, the Swansons were notified of
their eligibility for a Home Affordable Modification Program (HAMP)
Workout Plan.
Id. Ex. B.
The Workout Plan required payments of
$2,808.49 from April 2010 through June 2010.
See id. Ex. C ¶ 2.
A letter from GMAC accompanying the Workout Plan stated that
the Swansons had not yet met “all of the qualifications for the
Permanent Modification.”
stated
that
it
was
Id. Ex. B.
“Step
One
of
In fact, the Workout Plan
[a]
Two-Step
Documentation
Process,” and that GMAC “may provide” a permanent loan modification
if the Swansons remained in compliance with the terms of the
Workout Plan.
Id. Ex. C (emphasis added).
Further, the Workout
Plan stated that “if prior to the [completion of the Workout Plan],
I have not made the Trial Period Payments ... the Loan Documents
will not be modified and this Plan will terminate.”
2F.
Id. Ex. C ¶
The documents explained “that the plan is not a modification
of the Loan Documents and that the Loan Documents will not be
modified unless and until I meet all of the conditions required for
modification.”
Id. Ex. C ¶ 2G.
Finally, the Workout Plan
explained that if the Swansons complied with all requirements of
the Workout Plan, then GMAC “may send ... a Modification Agreement
for ...
signature
which
will
modify
[the]
Loan
Documents
necessary to reflect th[e] new estimated payment amount.”
C ¶ 3 (emphasis added).
3
as
Id. Ex.
The Swansons timely submitted their first two monthly payments
under the Workout Plan.
Id. ¶¶ 35-36.
It is unclear whether the
third payment was received in a timely manner.
Compare id. ¶ 37
(“In or about June 2010, Plaintiffs made their third and final
payment
...”),
with
Compl.
¶
10,
ECF
No.
1-1
(“Plaintiffs
acknowledges [sic] that the last payment, the June Payment, was
late.”).
GMAC notified the Swansons on July 9, 2010, that their
loan modification was being denied for untimely submission of their
last payment.
See Am. Compl. Ex. D.
Thereafter, the Swansons
submitted another application for a loan modification, whereupon an
unidentified GMAC representative allegedly told the Swansons “that
they were legally unable to proceed with a foreclosure during the
modification process.”
Id. ¶ 42.
On September 8, 2010, the Swansons received a notice of
mortgage foreclosure.
Id. Ex. E.
The notice indicated that a
sheriff’s sale was scheduled for November 2, 2010, and that the
Swanson’s redemption period would end on May 2, 2011.
at 2-3.
Id. Ex. E,
Shortly thereafter, the Swansons received notification
from GMAC that their third loan modification was denied.
F.
The
Swansons
submitted
yet
another
Id. Ex.
loan-modification
application, and were allegedly told that “GMAC would request a
postponement once the Sheriff’s sale date drew closer.” Id. ¶¶ 5051, 58.
The sheriff’s sale commenced, as originally scheduled, on
November 2, 2010.
Id. ¶ 60.
4
On March 22, 2011, the Swansons began this action in state
court.
Defendants timely removed.
On November 18, 2011, the
Swansons filed an amended complaint alleging breach of contract,
breach of
mortgagee
duty,
fraud,
negligent misrepresentation,
promissory estoppel and unjust enrichment.
The Swansons also seek
a declaration that they have fully performed their obligations and
are entitled to modification of the Note and injunctive relief
tolling the redemption period.
Defendants move to dismiss.
DISCUSSION
I.
Loan Modification
Defendants first argue that the Swansons’ claims are per se
barred because HAMP lacks a private right of action.
The United
States Department of the Treasury created HAMP in response to a
directive in the Emergency Economic Stabilization Act of 2008
(EESA), 12 U.S.C. §§ 5201–5261. HAMP gives financial incentives to
encourage
mortgage
servicers
to
modify
mortgage
loans.
See
Williams v. Geithner, No. 09-1959, 2009 WL 3757380, at *2 (D. Minn.
Nov. 9, 2009).
As this court has previously noted, there is no
private right of action under HAMP.
See McInroy v. BAC Home Loan
Servicing, LP, No. 10-4342, 2011 WL 1770947, at *3 (D. Minn. May 9,
2011).
HAMP uses a two-step process for modifications.
See U.S.
Dep’t of Treasury, Supplemental Directive 09-01, Introduction to
5
the Home Affordable Modification Program 14 (2009).
Step one
involves a trial plan in which a servicer and borrower agree to
trial payments.
criteria,
Participating servicers must evaluate several
including
a
net
present
calculation,3
value
considering whether to offer a modification.
3757380, at *2–3 & 3 n.3.
when
Williams, 2009 WL
If a borrower meets all HAMP criteria
and makes trial payments, step two involves modification of the
underlying loan.
See Supplemental Directive 09-01, at 14.
The
Trial Period Plan is “three months in duration (or longer if
necessary to comply with applicable contractual obligations).” Id.
at 17.
Defendants
cite
Cox
v.
Mortgage
Electronic
Registration
Systems, 794 F. Supp. 2d 1060 (D. Minn. 2011), in support of their
argument that the Swansons’ claims are barred by the lack of
private remedy under HAMP.
The Swansons respond that Cox does not
stand for the proposition that HAMP creates an absolute shield for
lenders under state law.
The court agrees.
Cox did not consider
whether state law claims that implicate HAMP are preempted.4
Instead, in Cox, the court determined that the lack of a private
cause of action reinforces the fact that HAMP, the ESSA and entry
3
The NPV calculation compares the expected return if a loan
were modified with the expected return if not modified.
4
Preemption is a powerful doctrine that the court does not
invoke with a single sentence.
As in Cox, the court need not
address the question of preemption, because each of the Swansons’
claims fail on the merits.
6
into a Trial Period Plan do not create an unconditional entitlement
to a loan modification.
As a result, each of the state-law claims
in Cox failed on the merits.
This case is similar.
All of the Swansons’ claims relate to
their belief that they were entitled to a modification based on the
Workout Plan and the defendants’ conduct associated with the
request.
II.
Accordingly, as in Cox, the court addresses each claim.
Standard of Review
To survive a motion to dismiss for failure to state a claim,
“‘a complaint must contain sufficient factual matter, accepted as
true, to state a claim to relief that is plausible on its face.’”
Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 594 (8th Cir. 2009)
(quoting Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009)).
“A
claim has facial plausibility when the plaintiff [has pleaded]
factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.”
Iqbal, 129 S. Ct. at 1949 (citing Bell Atl. Corp. v. Twombly, 550
U.S. 544, 556 (2007)).
Although a complaint need not contain
detailed factual allegations, it must raise a right to relief above
the speculative level.
See Twombly, 550 U.S. at 555.
“[L]abels
and conclusions or a formulaic recitation of the elements of a
cause of action are not sufficient to state a claim.”
Iqbal, 129
S. Ct. at 1949 (citation and internal quotation marks omitted).
7
III.
State Law Claims
A.
Breach of Contract
A breach of contract claim requires the plaintiff to establish
formation of a contract, performance of conditions precedent and a
breach.
See Thomas B. Olson & Assocs., P.A. v. Leffert, Jay &
Polglaze, P.A., 756 N.W.2d 907, 918 (Minn. Ct. App. 2008).
Formation of a contract requires “a specific and definite offer,
acceptance and consideration.”
Id.
The court judges contract
formation based on the objective conduct of the parties.
Id.
The Swansons argue that the Workout Plan is a contract to
modify the Note.
The defendants respond that a contract was not
formed, because no offer to modify was present.
The court agrees.
The amended complaint does not allege facts that would allow the
court to infer that the defendants made an offer to modify the
Note. In fact, the Workout Plan specifically states that GMAC “may
send ... a Modification Agreement” at a later date and “that the
plan is not a modification of the Loan Documents.”
C ¶¶ 2G, 3.
Am. Compl. Ex.
In other words, the Workout Plan is an offer to
consider modification, expressly conditioned on continued trial
payments (for three months or longer) and other criteria.
See
Laurent v. Mortg. Elec. Registration Sys., Inc., No. 11-2585, 2011
WL 6888800, at *2 (D. Minn. Dec. 30, 2011); Wittkowski v. PNC
Mortg., No. 11-1602, 2011 WL 5838517, at *3-4 (D. Minn. Nov. 18,
2011).
As a result, no contract formed.
8
Further,
neither
the
Workout
Plan
nor
any
alleged
oral
representations qualify as a credit agreement under Minnesota law.
Agreements “to lend or forbear repayment of money ... to otherwise
extend credit, or to make any other financial accommodation” must
be “in writing, express[] consideration, set[] forth the relevant
terms and conditions, and [be] signed by the creditor and the
debtor.”
Minn. Stat. § 513.33, subdivs. 1, 2; see Tharaldson v.
Ocwen Loan Servicing, LLC, No. 11-1392, 2011 WL 6957555, at *4 (D.
Minn. Dec. 15, 2011).
The Swansons argue that § 513.33 does not apply, because the
Workout Plan “was a modification of an existing credit agreement.”
Pls.’ Mem. Opp’n 14-15.
Section 513.33, however, applies to
“financial accommodations,” and although this term is undefined,
the statute includes examples such as “forbearing from exercising
remedies under prior credit agreements, or extending installments
due under prior credit agreements.”
2.
Minn. Stat. § 513.33, subdiv.
The Workout Plan encompasses both examples, and thus § 513.33
is applicable.
Neither the Workout Plan nor any oral representations modified
the
terms
or
conditions,
such
as
monthly-payment
interest rates, of the Swansons’ original Note.
amounts
or
Therefore, no new
contract formed and dismissal of this claim is warranted.5
5
Because the Swansons’ breach of contract claim is barred by
Minnesota Statutes § 513.33, the court need not address whether
(continued...)
9
B.
Breach of Mortgagee Duty
The Swansons next allege a breach of the mortgagee duty under
Minnesota Statutes § 580.11.
This statute relates to foreclosure
by advertisement and states that “the mortgagee, the mortgagee’s
assignee, or the legal representative of either or both, may fairly
and in good faith purchase the premises so advertised, or any part
thereof, at such sale.” Minn. Stat. § 580.11. The statute imposes
no
fiduciary
duty
on
the
mortgagee
and
does
not
concern
a
mortgagee’s actions prior to foreclosure. See Scott v. Wells Fargo
Bank, N.A., No. 10-3368, 2011 WL 381766, at *4 (D. Minn. Feb. 2,
2011).
The
Swansons
allege
that
defendants
breached
their
“statutory duty of good faith and fair dealing by foreclosing on
the Property despite the existence of the Modification.”
Compl. ¶ 81.
Am.
As the court already explained, a contact for a
permanent loan modification never existed.
Therefore, the claim
for breach of mortgagee duty fails.
5
(...continued)
equitable estoppel and the doctrine of part performance preclude
application of the statute of frauds. The court notes, however,
that both claims nevertheless fail.
As to equitable estoppel, neither concealment of a material
fact nor detrimental reliance can be shown. See Lunning v. Land
O’Lakes, 303 N.W.2d 452, 457 (Minn. 1980).
Further, part
performance is inapplicable, because detrimental reliance cannot be
shown. See Burke v. Fine, 51 N.W.2d 818, 820 (Minn. 1952).
The court also notes that even if a viable contract had
formed, the Swansons failed to meet a condition precedent, because
they stopped monthly payments.
10
C.
Fraud
A plaintiff must plead fraud with particularity.
Civ. P. 9(b).
See Fed. R.
To satisfy the heightened pleading requirement, a
plaintiff must set forth the “who, what, when, where, and how” of
an alleged fraud. United States ex rel. Joshi v. St. Luke’s Hosp.,
Inc., 441 F.3d 552, 556 (8th Cir. 2006).
In other words, a
plaintiff must plead “the time, place and contents” of the false
representations, the identity of the individual who made the
representations and what was obtained thereby.
BJC Health Sys. v.
Colom. Cas. Co., 478 F.3d 908, 917 (8th Cir. 2007).
Under Minnesota law, a plaintiff establishes a claim for
fraudulent misrepresentation by establishing that:
(1) there was a false representation by a
party of a past or existing material fact
susceptible of knowledge; (2) made with
knowledge of the falsity of the representation
or made as of the party’s own knowledge
without knowing whether it was true or false;
(3) with the intention to induce another to
act in reliance thereon; (4) that the
representation caused the other party to act
in reliance thereon; and (5) that the party
suffer pecuniary damage as a result of the
reliance.
Specialized Tours, Inc. v. Hagen, 392 N.W.2d 520, 532 (Minn. 1986)
(citations omitted).
The fraud claim is based on two alleged misrepresentations:
1) that the Swansons would receive a permanent loan modification if
they complied with the terms of the Workout Plan and 2) that the
defendants could not foreclose during the modification process.
11
Am. Compl. ¶¶ 84-85.
As an initial matter, these bare assertions
do
Rule
not
satisfy
the
8
pleading
standard,
much
less
the
heightened pleading standard imposed under Rule 9.
As to the Workout Plan, the Swansons are unable to establish
a false representation.
The Workout Plan stated that it was “not
a modification of the Loan Documents.”
Id. Ex. C ¶ 3; see Laurent,
2011 WL 6888800, at *4 (holding that trial period plan did not
create a false representation).
Further, the Swansons fail to
plead “that the statements were made with knowledge of the falsity
of
the
representation
damages.”
[or]
that
the
false
statements
caused
See Cox, 794 F. Supp. 2d at 1066.
The alleged oral representation that defendants could not hold
a sheriff’s sale during the loan-modification process also fails.
The Swansons are unable to plead detrimental reliance, because at
the time of the alleged misrepresentation, they were already in
default on their mortgage.
In other words, the Swansons had a
preexisting legal duty to make monthly Note payments. See Laurent,
2011 WL 6888800, at *4. Moreover, the Swansons fail to specify who
made the allegedly false representation.
See Ming’ate v. Bank of
Am., N.A., No. 11-1787, 2011 WL 4590431, at *4 (D. Minn. Sept. 30,
2011).
Therefore,
the
fraud
claim
warranted.
12
fails
and
dismissal
is
D.
Negligent Misrepresentation
A person makes a negligent misrepresentation when “(1) in the
course of ... a transaction in which he or she has a pecuniary
interest,
(2)
the
person
supplies
false
information
for
the
guidance of others in their business transactions, (3) another
justifiably relies on the information, and (4) the person making
the representation has failed to exercise reasonable care in
obtaining or communicating the information.”
Valspar Refinish,
Inc. v. Gaylord’s, Inc., 764 N.W.2d 359, 369 (Minn. 2009) (citation
omitted).
The bases for the negligent misrepresentation claim are the
same
as
the
fraud
claim:
that
the
Swansons
would
receive
a
permanent loan modification and that defendants could not foreclose
during the modification process.
As with the fraud claim, the
negligent misrepresentation claim fails under Rules 8 and 9.
See
Trooien v. Mansour, 608 F.3d 1020, 1028 (8th Cir. 2010). Moreover,
the Swansons fail to plead facts demonstrating reliance on the
Workout Plan or alleged oral representations.
that
plaintiffs
reasonably
relied
on
the
sufficient to survive a motion to dismiss.”
at 1067.
“The bare assertion
information
is
not
Cox, 794 F. Supp. 2d
Therefore, dismissal of the negligent misrepresentation
claim is warranted.
13
E.
Promissory Estoppel
Promissory estoppel is “an equitable doctrine that implies a
contract in law when none exists in fact.”
Martens v. Minn. Mining
& Mfg. Co., 616 N.W.2d 732, 746 (Minn. 2000) (citation and internal
quotation marks omitted).
To state a claim under promissory
estoppel, a plaintiff must prove that “(1) a clear and definite
promise was made, (2) the promisor intended to induce reliance and
the promisee in fact relied to his or her detriment, and (3) the
promise must be enforced to prevent injustice.”
Id.
The Swansons argue that the Workout Plan is a promise to
provide a permanent loan modification.6
Workout plan was not a promise.
As already explained, the
Therefore, dismissal of the
promissory estoppel claim is warranted.7
F.
Unjust Enrichment
To state a claim for unjust enrichment, a plaintiff must show
that “another party knowingly received something of value to which
he was not entitled, and that the circumstances are such that it
would be unjust for that person to retain the benefit.” Schumacher
v. Schumacher, 627 N.W.2d 725, 729 (Minn. Ct. App. 2001).
defendants were entitled to payments under the Note.
The
Retaining
6
The Swansons do not base their promissory estoppel claim on
any oral representations. See Am. Compl. ¶¶ 97-102.
7
The court also notes that the Swansons’ promissory estoppel
claim is barred by § 513.33 and the statue of frauds.
See
Tharaldson, 2011 WL 6957555, at *4.
14
payments and exercising a contractual right to foreclose after the
Swansons failed
to
make
payments
is not
unjust.
Therefore,
dismissal of the unjust enrichment claim is warranted.
G.
Declaratory and Injunctive Relief
Lastly, the Swansons seek a declaration that they performed
their obligations and that defendants must modify the Note.
The
Swansons also seek an order tolling and extending their right of
redemption. The court has already determined that the Swansons did
not perform their payment obligation. The court further determined
that the Swansons did not plead any basis for relief.
As a result,
declaratory judgment is not warranted. Because the court dismisses
the complaint, the request for injunctive relief is moot.
IV.
Leave to Amend
Under the Federal Rules of Civil Procedure, “leave [to amend]
shall be freely given when justice so requires.”
15(a).
Fed. R. Civ. P.
In other words, the court should grant leave to amend,
unless doing so would result in “undue delay, bad faith on the part
of
the
moving
prejudice.”
party,
futility
of
the
amendment
or
unfair
Sanders v. Clemco Indus., 823 F.2d 214, 216 (8th Cir.
1987) (citation omitted).
The
Swansons
filed
their
complaint
on
March
22,
2011.
Thereafter, the defendant consented twice to the filing of an
amended complaint.
See ECF Nos. 24, 31.
After the case was
briefly stayed, an amended complaint was filed on November 18,
15
2011.
See ECF No. 34.
Although the court is uncertain whether the
nearly seven-month delay between filing the original and amended
complaints was a delay tactic, the court need not answer this
question.
All claims rely on a faulty interpretation of the
Workout Plan, and leave to amend for filing a third complaint would
be futile.
Additionally,
plaintiffs
pertaining to leave to amend.
failed
to
follow
local
rules
Under Local Rule 15.1, “[a] party
who moves to amend a pleading shall file such motion and shall
attach to the motion: (1) a copy of the proposed amended pleading,
and (2) a redline comparing the proposed amended pleading to the
party’s operative pleading.”
Such a motion must be made fourteen
days in advance of a hearing.
See D. Minn. L.R. 7.1(a).
Where, as
here, the plaintiff has not filed a motion to amend or a redlined
complaint, the motion is not properly before the court. See O’Neil
v. Simplicity, Inc., 574 F.3d 501, 505 (8th Cir. 2009) (citation
omitted).
Therefore, the court denies plaintiffs’ request for
leave to amend.
16
CONCLUSION
Accordingly, based on the above, IT IS HEREBY ORDERED that the
motion to dismiss [ECF No. 36] is granted.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated:
April 3, 2012
s/David S. Doty
David S. Doty, Judge
United States District Court
17
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?