Bohnhoff v. Wells Fargo Bank, N.A.
Filing
21
ORDER granting 7 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. 11-3408(DSD/JSM)
Christine L. Bohnhoff,
Plaintiff,
ORDER
v.
Wells Fargo Bank, N.A.,
Defendant.
Christopher P. Parrington, Esq., Andrew A. Dosdall, Esq.,
Patrick D. Boyle, Esq. and Skjold Parrington, P.A., 222
South Ninth Street, Suite 3220, Minneapolis, MN 55402,
counsel for plaintiff.
Charles F. Webber, Esq., Erin L. Hoffman, Esq. and Faegre
Baker Daniels, 90 South Seventh Street, Suite 2200,
Minneapolis, MN 55402, counsel for defendant.
This matter is before the court upon the motion to dismiss by
defendant Wells Fargo Bank, N.A. (Wells Fargo).
Based 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 in April 2005, by plaintiff Christine
L. Bohnhoff for property located at 119 50th Avenue, Princeton,
Minnesota 55371.
$288,000.
Compl. ¶¶ 4–5.
See id. ¶ 6.
The Note had a principal value of
Bohnhoff made monthly mortgage payments of
$2000 until September 2009.
See id. ¶¶ 7, 14.
In late 2009,
Bohnhoff entered into a Trial Payment Plan (TPP) with Wells Fargo
under the Home Affordable Modification Program (HAMP).
See Compl.
Ex. A; App. 1-6, ECF No. 13.
The
TPP
states
that
Documentation Process.”
it
is
“Step
One
of
App. 1-6, ECF No. 13.
[a]
Two-Step
Bohnhoff agreed
that the TPP was “not a modification of the Loan Documents” and
that “the Loan Documents would not be modified unless and until (i)
I meet all of the conditions required for modification, (ii) I
receive a fully executed copy of a Modification Agreement, and
(iii) the Modification Effective Date has passed.”
Id. ¶ 2(G).
The TPP indicated trial payments of $1,156.04 from November 2009
through January 2010, id. ¶ 2, but Bohnhoff agreed to continue
making monthly payments after January 2010 if she had not yet been
approved for a permanent loan modification.
See id. ¶ 4(D).
In April 2010, Wells Fargo told Bohnhoff that her net present
value (NPV) calculation1 made her ineligible for a modification.
Compl. Ex. A, at 2-3, ECF No. 1-1.
payments until September 2010.
Bohnhoff
asked
Wells
modification request.
Fargo
Bohnhoff continued making TPP
Id. ¶ 22.
to
On December 23, 2010,
reevaluate
See Compl. Ex. C.
the
status
D,
E.
By
October
2011
1
her
In response, Wells Fargo
explained that Bohnhoff’s loan was still under review.
Exs.
of
Bohnhoff
had
not
See Compl.
received
a
The NPV calculation compares the expected return if a loan
were modified with the expected return if not modified.
2
modification, and Wells Fargo threatened to initiate foreclosure
proceedings.
On October 27, 2011, Bohnhoff began this action in state
court, claiming breach of contract, breach of mortgagee duty,
fraud, negligent misrepresentation, promissory estoppel, unjust
enrichment
and
breach
Originator
and
Servicer
Mortgage Act).
of
the
Minnesota
Licensing
Act
Residential
(Minnesota
Mortgage
Residential
Bohnhoff also seeks a declaration that she has
fully performed her obligations and is entitled to modification of
the Note and injunctive relief tolling foreclosure.
Wells Fargo
timely removed, and moves to dismiss.
DISCUSSION
I.
Loan Modification
Wells Fargo first argues that Bohnhoff’s 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
3
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
the Home Affordable Modification Program 14 (2009).
Step one
involves a trial plan in which a servicer and borrower agree to
trial payments.
Participating servicers must evaluate several
criteria, including a NPV calculation, when considering whether to
offer a modification.
Williams, 2009 WL 3757380, at *2–3 & 3 n.3.
If a borrower meets all HAMP criteria and makes trial payments,
step two
involves
modification
of
the
Supplemental Directive 09-01, at 14.
underlying
loan.
See
The Trial Period Plan is
“three months in duration (or longer if necessary to comply with
applicable contractual obligations).”
Defendant
cites
Cox
v.
Id. at 17.
Mortgage
Electronic
Registration
Systems, 794 F. Supp. 2d 1060 (D. Minn. 2011), in support of its
argument that Bohnhoff’s claims are barred by a lack of private
remedy under HAMP.
Bohnhoff responds 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.2
2
Instead, in
Preemption is a powerful doctrine that the court does not
invoke with a single sentence.
As in Cox, the court need not
(continued...)
4
Cox, the court determined that the lack of a private cause of
action reinforces the fact that HAMP, the ESSA and entry 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 Bohnhoff’s claims relate to her
belief that she is entitled to modification based on the TPP and
Wells Fargo’s conduct associated with the request. Accordingly, as
in Cox, the court addresses each claim.
II.
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.
2
“[L]abels
(...continued)
address the question of preemption, because each of Bohnhoff’s
claims fail on the merits.
5
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).
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.
Bohnhoff argues that the TPP is a contract to modify the Note.
Wells Fargo responds that a contract was not formed, because no
offer to modify was present.
The court agrees.
The complaint does
not allege facts that would allow the court to infer that Wells
Fargo made
an
offer
to
modify the
Note.
In
fact,
the
TPP
specifically stated that it was “not a modification of the Loan
Documents.”
App. 1, ¶ 2(G), ECF No. 13.
In other words, the TPP
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.
6
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.
Further, neither the TPP nor any oral representations3 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).
Bohnhoff argues that § 513.33 does not apply, because the TPP
“was a modification of an existing credit agreement.”
Pl.’s Mem.
Opp’n.
“financial
15.
Section
513.33,
however,
applies
to
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.”
Minn. Stat. § 513.33, subdiv. 2.
The
TPP encompasses both examples, and thus § 513.33 is applicable.
3
Although both parties discuss Minnesota Statutes § 513.33 in
their moving papers, the complaint contains no oral promises
regarding a loan modification.
7
Neither the Workout Plan nor any oral representations modified
the
terms
or
conditions,
such
as
monthly-payment
interest rates, of Bohnhoff’s original Note.
amounts
or
Therefore, no new
contract formed and dismissal of this claim is warranted.4
B.
Breach of Mortgagee Duty
Bohnhoff next alleges breach of 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).
Since no foreclosure sale occured, this claim fails.
See
Compl. ¶ 37, see also Laurent, 2011 WL 6888800, at *5-6 (explaining
4
Because Bohnhoff’s breach of contract claim is barred by
Minnesota Statutes § 513.33, the court need not address whether
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, Bohnhoff failed to meet a condition precedent, because she
stopped monthly payments.
8
foreclosure
as
prerequisite
to
§
580.11
claim).
Therefore,
dismissal is warranted.
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).
9
The fraud claim is based on two alleged misrepresentations:
1) that Bohnhoff would receive a permanent modification if she
complied with the terms of the TPP and 2) that Wells Fargo told
Bohnhoff she needed to default on her Note payments prior to being
eligible for a HAMP modification. As an initial matter, these bare
assertions do not satisfy the Rule 8 pleading standard, much less
the heightened pleading standard imposed under Rule 9.
As to the TPP, Bohnhoff is unable to establish a false
representation.
The TPP stated that it was “not a modification of
the Loan Documents.”
App. 1, ¶ 2(G), ECF No. 13; see Laurent, 2011
WL 6888800, at *4 (holding that trial period plan did not create a
false representation). Thus, it is impossible for Bohnhoff to show
that the TPP established facts that “were made with knowledge of
the falsity of the representation [or] that the false statements
caused damages.”
The
alleged
See Cox, 794 F. Supp. 2d at 1066.
oral
representation
that
Bohnhoff
could
not
qualify for a loan modification unless she was in default also
fails.
Bohnhoff cannot show detrimental reliance, because she did
not allege that she could have made payments if not for Wells
Fargo’s alleged misrepresentation.
payments on her own accord.
In fact she stopped making
Compl. ¶ 22. Moreover, Bohnhoff fails
to specify when and who made the allegedly false representation.
See Ming’ate v. Bank of Am., N.A., No. 11-1787, 2011 WL 4590431, at
10
*4 (D. Minn. Sept. 30, 2011).
Therefore, the fraud claim fails and
dismissal is warranted.
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 basis for the negligent misrepresentation claim is the
same as the fraud claim: Wells Fargo provided false information
about the modification.
As with the fraud claim, the negligent
misrepresentation claim fails under Rules 8 and 9.
Mansour, 608 F.3d 1020, 1028 (8th Cir. 2010).
See Trooien v.
Moreover, Wells
Fargo told Bohnhoff several times that the modification was not
complete and that she needed to continue making trial payments.
See Compl. Exs. D, E.
There is no evidence that the information
was false or that Wells Fargo failed to exercise reasonable care in
providing the information.
Additionally, Bohnhoff fails to plead
facts demonstrating reliance on either the TPP or alleged oral
representations.
“The bare assertion that plaintiffs reasonably
11
relied on the information is not sufficient to survive a motion to
dismiss.”
Cox, 794 F. Supp. 2d at 1067.
Therefore, dismissal of
the negligent misrepresentation claim is warranted.
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.
Bohnhoff argues that the TPP is a promise to provide a
permanent loan modification.5
not a promise.
As already explained, the TPP was
Moreover, Bohnhoff pleaded no facts that support a
finding of detrimental reliance; instead, she had a legal duty to
make payments on the Note.
Further, Bohnhoff does not show that
enforcing the alleged promises is necessary to prevent injustice.
Wells Fargo was entitled to receive payments under the Note, and
once Bohnhoff ceased making payments, Wells Fargo was entitled to
foreclose the mortgage and sell the home.
See Brisbin v. Aurora
Loan Servs., LLC, No. 10-2130, 2011 WL 1641979, at *4 (D. Minn. May
5
Bohnhoff does not allege a claim for promissory estoppel
based on any oral representations. See Compl. ¶¶ 70-75.
12
2, 2011). Therefore, dismissal of the promissory estoppel claim is
warranted.6
F.
Unjust Enrichment
To show 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). Wells Fargo
was entitled
to
payments
under
the
Note.
Retaining
smaller
payments under the TPP and exercising its contractual right to
foreclose after Bohnhoff refused to make payments is not unjust.
Therefore, dismissal of the unjust enrichment claim is warranted.
G.
Residential Mortgage Act
Bohnhoff next argues that Wells Fargo violated the Minnesota
Residential
Mortgage
1(a)(9), (19).
borrower
injured
Act.
See
Minn.
Stat.
§
58.13,
subdiv.
Minnesota Statutes § 58.18 provides that “[a]
by
a
violation
of
the
standards,
duties,
prohibitions, or requirements of section[] 58.13 ... shall have a
private right of action.”
Minn. Stat. § 58.18, subdiv. 1.
In
response, Wells Fargo argues that National Bank Act preempts the
Minnesota Residential Mortgage Act.
6
The court also notes that Bohnhoff’s promissory estoppel
claim is barred by § 513.33 and the statue of frauds.
See
Tharaldson, 2011 WL 6957555, at *4.
13
The National Bank Act is one of only three “classes of cases”
where the
Supreme
Court
has
found complete preemption.
See
Firstcom, Inc. v. Qwest Corp., 555 F.3d 669, 677 n.6 (8th Cir.
2009).
The
National
Bank
Act
authorizes
the
Office
of
the
Comptroller (OCC) to “prescribe rules and regulations” that have
the same preemptive effect as federal statutes.
12 U.S.C. § 93a;
see Fidelity Fed. Sav. & Loan Ass’n v. de la Cuestra, 458 U.S. 141,
153 (1982).
Under OCC regulations, “state laws that obstruct, impair, or
condition a national bank’s ability to fully exercise its Federally
authorized real estate lending powers do not apply to national
banks.”
12 C.F.R. § 34.4(a).
“Specifically, a national bank may
make real estate loans ..., without regard to state law limitations
concerning
...
[d]isclosure
and
advertising,
including
laws
requiring specific statements, information, or other content to be
included in credit application forms, credit solicitations, billing
statements, credit contracts, or other credit-related documents
....”
Id. § 34.4(a)(9).
regulates
what a
The Minnesota Residential Mortgage Act
lender may
residential loan transaction.”
(18).
represent “in
connection
with a
Minn. Stat. § 58.13, subdiv. (9),
Therefore, Bohnhoff’s claim is preempted, and dismissal is
warranted.7
7
The Minnesota Residential Mortgage Act applies to entities
“acting as a residential originator or servicer.”
Minn. Stat.
(continued...)
14
H.
Declaratory and Injunctive Relief
Bohnhoff
seeks
a
declaration
that
she
performed
her
obligations and that Wells Fargo must modify the Note.
Bohnhoff
also seeks an order enjoining foreclosure proceedings.
The court
has already determined that Bohnhoff did not perform her payment
obligation.
The court further determined that Bohnhoff did not
plead any basis for relief.
not warranted.
As a result, declaratory judgment is
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).
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
7
(...continued)
§ 58.13, subdiv. 1(a). Thus, the statute is not a state law of
general applicability that “only incidentally affects the exercise
of national banks’ real estate lending powers.”
12 C.F.R.
§ 34.4(b).
15
pleading.”
a hearing.
Such a motion must be made fourteen days in advance of
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).
Moreover, all of Bohnhoff’s claims rely on a faulty
interpretation of the TPP, and leave to amend would be futile.
Therefore, the court denies plaintiff’s request for leave to amend.
CONCLUSION
Accordingly, based on the above, IT IS HEREBY ORDERED that the
motion to dismiss [ECF No. 7] is granted.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated:
April 3, 2012
s/David S. Doty
David S. Doty, Judge
United States District Court
16
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