Schulz et al v. Wells Fargo Bank, N.A.
Filing
21
ORDER granting 3 Wells Fargo's Motion to Dismiss (Written Opinion). Signed by Judge Joan N. Ericksen on December 17, 2012. (CBC)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Lana Schulz and Richard Schulz,
Plaintiffs,
v.
Civil No. 12-2147 (JNE/JSM)
ORDER
Wells Fargo Bank, N.A.,
Defendant.
This case was brought by Plaintiffs Lana Schulz and Richard Schulz (“the Schulzs”)
against Defendant Wells Fargo Bank, N.A. (“Wells Fargo”), alleging wrongful foreclosure
(Count I), violation of 12 U.S.C. § 2605 (Count II), false advertising in violation of Minnesota
Statutes § 325F.67 (Count III), consumer fraud in violation of Minnesota Statutes § 325F.69
(Count IV), and promissory estoppel (Count V). Now before the Court is Wells Fargo’s motion
to dismiss for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil
Procedure.
I.
BACKGROUND
The Schulzs mortgaged their property in Rochester, Minnesota to Wachovia Mortgage,
FSB (“Wachovia”) in January 2008. Wachovia is now part of Wells Fargo. 1 In September
2011, the Schulzs sought to modify their loan through the Home Affordable Modification
Program (“HAMP”). The Complaint alleges that Wells Fargo advised the Schulzs that to be
eligible for a loan modification under HAMP, they had to stop making mortgage payments. The
Schulzs assert that in reasonable reliance on that “advice,” they stopped making mortgage
payments.
1
The Complaint and Plaintiffs’ brief use “Wachovia” and “Wells Fargo” interchangeably.
For the sake of simplicity, the Court will refer to these entities as “Wells Fargo.”
1
In January 2011, Wells Fargo commenced foreclosure proceedings against the Schulzs
and scheduled a Sheriff’s sale. In September 2011, Wells Fargo informed the Schulzs that their
mortgage was “currently being reviewed under HAMP.” Later that month, Wells Fargo
informed the Schulzs by letter that the foreclosure sale was being postponed to November 28,
2011. 2 Wells Fargo noticed the foreclosure through advertisements in the Stewartville Star from
October 11, 2011 to November 28, 2011. In a letter postmarked November 14, 2011, Wells
Fargo informed the Schulzs that their request for a loan modification was being denied. The
Schulzs assert that they did not receive this November 14 letter until December 2, 2011. They
did, however, learn during a phone conversation with Wells Fargo on November 21, 2011 that
the Sheriff’s sale was scheduled to occur on November 28. The Sheriff’s sale occurred on
November 28, as scheduled. The Complaint alleges that on December 5, 2011, the Schulzs
called Wells Fargo and appealed the decision to deny the loan modification. Wells Fargo denied
the appeal by letter dated February 15, 2012. The Complaint also alleges that the Minnesota
Attorney General told the Schulzs that Wells Fargo intended to rescind the Sheriff’s sale. The
redemption period expired on May 28, 2012, and Wells Fargo commenced an eviction action
against the Schulzs on July 26, 2012.
On July 30, 2012, the Schulzs filed the Complaint in this case in Olmsted County District
Court, seeking to enjoin the eviction action that is currently pending in state court and for
compensatory damages. Wells Fargo was served on July 31 and removed the action to federal
court on August 30, 2012.
2
Plaintiffs allege that this letter was postmarked November 29, 2011, but that they never
received it in the mail.
2
II.
DISCUSSION
When ruling on a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6)
of the Federal Rules of Civil Procedure, a court must accept the facts alleged in the complaint as
true and grant all reasonable inferences in favor of the plaintiff. Mulvenon v. Greenwood, 643
F.3d 653, 656 (8th Cir. 2011). Although a pleading is not required to contain detailed factual
allegations, “[a] pleading that offers ‘labels and conclusions’ or ‘a formulaic recitation of the
elements of a cause of action will not do.’” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009)
(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). “To survive a motion to
dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to
relief that is plausible on its face.’” Id. (quoting Twombly, 550 U.S. at 570). “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.” Id. The court “generally may
not consider materials outside the pleadings,” but “[i]t may . . . consider some public records,
materials that do not contradict the complaint, or materials that are ‘necessarily embraced by the
pleadings.” Noble Sys. Corp. v. Alorica Cent., LLC, 543 F.3d 978, 982 (8th Cir.2008) (quoting
Porous Media Corp. v. Pall Corp., 186 F.3d 1077, 1079 (8th Cir.1999)).
A. Equitable Relief
There is currently an eviction action pending before the state district court. The
Complaint alleges that “Plaintiffs will suffer irreparable harm if they are forced to leave said
premises by means of a pending eviction action, thus entitling them to equitable relief.” Compl.
¶ 29. In their demand for relief, the Schulz request “injunctive relief preventing said eviction
action for proceeding” and “for such other and further relief as the court may deem just and
equitable.” Id. ¶ 41. Section 2283 of Title 28 of the United States Code provides that “[a] court
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of the United States may not grant an injunction to stay proceedings in a State court except as
expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to
protect or effectuate its judgments.” Accordingly, any claims in which the requested relief is an
injunction of the pending state court action must be dismissed.
B. Wrongful Foreclosure (Count I)
The primary thrust of Plaintiffs’ claim is that the Sheriff’s sale held on November 28,
2011 is invalid because Wells Fargo published the statutorily-required notices of foreclosure in
the Stewartville Star. The Complaint makes the conclusory legal assertion that “[u]nder
Minnesota law, said paper, which was used for all notices in this case, is not an appropriate legal
publication for said notice.” Compl. ¶ 14.
Minnesota Statutes § 580.03 requires six weeks’ published notice of a foreclosure sale.
The public notice must be published in a qualified newspaper “that is likely to give notice in the
affected area or to whom it is directed.” Minn. Stat. § 331A.03, subdiv. 1. A “qualified
newspaper” is one which is “circulated in the political subdivision which it purports to serve.”
Minn. Stat. § 331A.02, subdiv. 1(d). “Political subdivision” means “a county, municipality,
school district, or any other local political subdivision or local or area district, commission,
board, or authority.” Id. § 331A.01, subdiv. 3. The Minnesota Secretary of State publishes a list
of qualified legal newspapers. See http://www.sos.state.mn.us/index.aspx?page=98. The
Stewartville Star is one of the listed qualified legal newspapers in Olmsted County. Rochester,
where the mortgaged property is located, is also in Olmsted County. The Complaint contains no
facts to support the bald allegation that the Stewartville Star was not an appropriate legal
publication for the notice of foreclosure.
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Moreover, this claim brought after the expiration of the redemption period is an
impermissible collateral attack. The property was sold on November 28, 2011, and the
redemption period expired on May 28, 2012. See Minn. Stat. § 580.23 (providing a six-month
redemption period). This lawsuit was not commenced until July 31, 2012. The Schulzs do not
allege that the parties agreed to an extension of the redemption period, nor do they allege that the
redemption period should be preserved pursuant to Minnesota Statutes § 580.28. “A claimed
irregularity in foreclosure proceedings, asserted after the statutory redemption period, is an
impermissible collateral attack.” Wittkowski v. PNC Mortg., Civil No. 11-1602, 2011 WL
5838517 (D. Minn. Nov. 18, 2011) (citing Prior Lake State Bank v. Mahoney, 216 N.W.2d 681
(Minn. 1974)). For both of the above reasons, Count I of the Complaint is dismissed.
C. Violation of 12 U.S.C. § 2605 (Count II)
At oral argument Plaintiffs agreed to dismiss this Count. Count II is therefore dismissed.
D. False Statement in Advertising (Count III) and Consumer Fraud (Count V)
The Complaint alleges that Wells Fargo advertises that it “promotes home ownership
through innovative programs” and “assists homeowners with loan modifications.” Plaintiffs
contend that this advertising is false, in violation of the False Statement in Advertising Act
(FSAA), Minn. Stat. § 325F.67, and that it also constitutes a violation of the Consumer Fraud
Act (CFA), Minn. Stat. § 315F.69.
The FSAA and CFA do not provide a private cause of action. Private citizens may
pursue claims under these statutes only through Minnesota’s private attorney general statute. See
Minn. Stat. § 8.31, subdiv. 3a. To state a claim under the private attorney general statute, a
plaintiff must demonstrate that its “cause of action benefits the public.” Ly v. Nystrom, 615
N.W.2d 302, 314 (Minn. 2000). To determine whether a lawsuit is for the public benefit, courts
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assess both the form of the alleged misrepresentation and the relief sought by the plaintiff. In re
Levaquin Prods. Liab. Litig., 752 F. Supp. 2d 1071, 1077 (D. Minn. 2010) (collecting cases).
Where plaintiffs seek only damages, courts typically find no public benefit “even when plaintiffs
are suing for injuries resulting from mass produced and mass marketed products.” Id.
Nonetheless, the lack, or inclusion, of a prayer for injunctive relief is not dispositive. Id.
The Schulz’s have not pleaded—nor do they even purport to plead—a public benefit.
The subject of this lawsuit is the foreclosure of the Schulzs home and the pending eviction action
against them. The only relief requested is an injunction of the eviction action and damages
allegedly resulting from the foreclosure. There is nothing in the Complaint to even suggest that
the public benefit is involved. Recovery under Minnesota’s private attorney general statute is
not available under these circumstances. For that reason, the Schulz’s FSAA and CFA claims
are dismissed.
E. Promissory Estoppel (Count IV)
The Complaint alleges that it was “reasonably foreseeable to Wells Fargo that Plaintiffs
would rely on its promises that, inter alia, Plaintiffs request for a loan modification was being
properly considered and processed and that said Sheriff’s sale would be rescinded.” The Schulzs
contend that they relied to their detriment on those alleged promises, and that as a result, they
allowed the Sheriff’s sale to occur and the redemption period to expire.
The Minnesota Credit Agreement Statute (MCAS) provides that “[a] debtor may not
maintain an action on a credit agreement unless the agreement is in writing, expresses
consideration, sets forth the relevant terms and conditions, and is signed by the creditor and the
debtor.” Minn. Stat. § 513.33, subdiv. 2. A “credit agreement” is “an agreement to lend or
forbear repayment of money, goods, or things in action, to otherwise extend credit, or to make
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any other financial accommodation.” Id., subdiv. 1(1). A loan modification constitutes a credit
agreement. Tharaldson v. Ocwen Loan Servicing, LLC, 840 F. Supp. 2d 1156, 1162 (D. Minn.
2011); Myrlie v. Countrywide Bank, 775 F. Supp. 2d 1100, 1109 (D. Minn. 2011); Labrant v.
Mtg. Elec. Registration Sys., Inc., Civil No. 11-3029 JRT/LIB, 2012 WL 1150879 (D. Minn.
Apr. 6, 2012).
The Complaint fails to allege that there was any writing between the parties that the loan
would be modified or the sale rescinded, both of which would constitute a “financial
accommodation” covered by the statute. Cf. Brisbin v. Aurora Loan Servs., LLC, 679 F.3d 748,
752-53 (8th Cir. 2012) (holding that a promise to postpone a foreclosure sale is a “credit
agreement” within the meaning of the statute). The MCAS prohibits the enforcement of this type
of oral agreement, even under the theory of promissory estoppel. See BankCherokee v. Insignia
Dev., LLC, 779 N.W.2d 896, 903 (Minn. Ct. App. 2010) (“[A]n oral promise that constitutes a
‘credit agreement’ under section 513.33 cannot be enforced under a theory of promissory
estoppel.”).
Even if promissory estoppel were available, to state a claim for promissory estoppel, the
Complaint must allege 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. Martens v. Minn. Min. & Mfg. Co., 616 N.W.2d 732, 746
(Minn. 2000). The Complaint contains no allegation of a “clear and definite promise.”
Regarding rescission of the Sheriff’s sale, the Complaint alleges only that “the Minnesota
Attorney General advised Plaintiffs that Wells Fargo Home Mortgage intended to rescind the
Sheriff’s sale.” Compl. ¶ 24. There is no factual allegation that Wells Fargo ever made any
promise to rescind the sale. The Complaint also fails to allege that Wells Fargo made any
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promise to modify the Schulzs’ loan agreement. The statements that the Schulzs’ mortgage was
“currently being reviewed under HAMP,” id. ¶ 12, that Wells Fargo was “very close to achieving
a loan modification,” id.¶ 16, and that Wells Fargo allegedly requested additional time to review
the case, id. ¶ 25, do not constitute clear and definite promises that Wells Fargo would enter into
a loan modification agreement. The Complaint asserts that Wells Fargo promised that the
Schulzs’ “request for a loan modification was being properly considered and processed.” Id.
¶ 37. But the Complaint itself acknowledges that the request was, in fact, considered—and
ultimately denied. Id. ¶ 18. The absence of any allegation of a clear and definite promise
provides another reason why this claim must be dismissed. 3
III.
CONCLUSION
Based on the files, records, and proceedings herein, and for the reasons stated above, IT
IS ORDERED THAT:
1. Wells Fargo’s Motion to Dismiss [Docket No. 3] is GRANTED.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated: December 17, 2012
s/Joan N. Ericksen
JOAN N. ERICKSEN
United States District Judge
3
At oral argument, Plaintiffs for the first time made vague passing reference to amending
the Complaint. At no point did they indicate a desire to actually do so. There is no motion to
amend before the Court. See D. Minn. LR 15.1. Moreover, for many of the reasons explained
above, the defects in this Complaint are not likely curable by amendment. See United States ex
rel. Roop v. Hypoguard USA, Inc., 559 F.3d 818, 822 (8th Cir. 2009) (“Futility is a valid basis
for denying leave to amend.”).
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