Hart et al v. Wells Fargo Home Mortgage, Inc. et al
ORDER granting 12 Motion to Dismiss for Failure to State a Claim. Signed on 10/11/16 by District Judge Nanette K. Laughrey. (Matthes Mitra, Renea)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF MISSOURI
MICHAEL D. HART and
PATTY S. HART,
WELLS FARGO HOME MORTGAGE,
INC., et. al.,
Pro se Plaintiffs Michael and Patty Hart bring this suit concerning their mortgage loan
against Defendants Wells Fargo Home Mortgage, Inc., Wells Fargo & Company, and Wells
Fargo Bank, N.A. The Defendants move to dismiss under Fed. R. Civ. P. 12(b)(6) for failure to
state a claim. Doc. 12. The motion is granted.
The Harts obtained a mortgage loan from Wells Fargo 2 using their residence as collateral.
Wells Fargo was not only the loan originator, but the loan servicer.
Harts began experiencing financial difficulties.
Starting around 2007, the
Both of the Harts lost their jobs in 2010 and
Mr. Hart was incarcerated from 2012 to May 2014. Their reduced income, plus living expenses
The facts alleged in the Harts’ Complaint, Doc. 1-2, are taken as true for purposes
of deciding the motion to dismiss for failure to state a claim. Bell Atlantic Corp. v. Twombly,
550 U.S. 544, 555 (2007).
Under the “Parties” subheading of Complaint, the Harts allege that Wells Fargo
Home Mortgage, Inc. and Wells Fargo & Company are a parent company or companies of Wells
Fargo Bank, N.A. They allege that Wells Fargo Bank N.A. is a national banking association,
with offices in Cole County, Missouri, that solicits applications for and makes mortgage loans.
Elsewhere in the Complaint, the Harts refer to the actions of “Lender,” without specifying which
Defendant they mean. Because any distinction between the Defendants does not affect the
resolution of the motion to dismiss, the Court will simply refer to “Wells Fargo.”
and the high interest rate on their loan, caused the Harts “extreme difficulty” in making their
mortgage payments. Doc. 1-2, p. 3 of 14, ¶ 13. The Harts also found that, “[s]ince [their] home
[had] suffered a severe loss in value from the time of its purchase, attempts at refinancing
through equity … proved futile.”
Id. at ¶ 14.
Wells Fargo “approved a loan modification
sometime in 2014 for” the Harts. Id., p. 9 of 14, ¶ 49. That modification appears to have been a
In early 2015, the Harts “sent a letter of hardship and their complete financial file to”
Id., p. 3 of 14, ¶ 15.
Wells Fargo mailed the Harts letters, indicating it was
investigating the Harts’ situation and promising a prompt response.
the Harts and Wells Fargo regarding the status of the Harts’ modification request continued for
months. The Harts accrued escalating late fees and other penalties, their credit was affected, and
it was “impossible for them to obtain financial products and loans from other institutions to
assist” them “in making the full payments on their loan[.]” Id. at ¶ 19. Wells Fargo “failed to
grant a permanent modification[.]” Id., p. 4 of 14, ¶ 21.
The loan is now in default and the
property is at risk of foreclosure. Id., p. 5 of 14, ¶ 27.
violation of unfair competition laws, declaratory judgment,
reformation, and breach of the implied covenant of good faith and fair dealing.
Under Rule 8(a)(2), a pleading must contain a “short and plain statement of the claim
showing that the pleader is entitled to relief.”
Fed. R. Civ. P. 8(a)(2).
Though this pleading
standard does not require “detailed factual allegations,” the complaint must include sufficient
factual allegations to provide the grounds on which the claim rests.
Twombly, l550 U.S. 544,
A pleading that offers labels, conclusions, a formulaic recitation of elements, or
naked assertions devoid of factual enhancement does not suffice.
Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009). Only well-pleaded facts are accepted as true, while “[t]hreadbare recitals of the
elements of a cause of action” and legal conclusions are not.
“[L]egal conclusions can
provide the framework of a complaint, [but] they must be supported by factual allegations.” Id.
at 679. See also Ashcroft, 556 U.S. at 678 (a court need not “accept as true legal conclusions,
even those stated as though they are factual allegations”).
When reviewing a pro se complaint, the Court construes it liberally and draws all
reasonable inferences from the facts in favor of the plaintiff.
Topchian v. JP Morgan Chase
Bank, N.A., 760 F.3d 843, 849 (8th Cir. 2014).
Count I: Fraud, Deceit, and Negligent Misrepresentation
To survive a motion to dismiss a claim of fraud, a plaintiff must plead sufficient facts to
establish: “(1) a representation; (2) its falsity; (3) its materiality; (4) the speaker’s knowledge of
its falsity or ignorance of its truth; (5) the speaker’s intent that it should be acted on by the
person in the manner reasonably contemplated; (6) the hearer’s ignorance of the falsity of the
representation; (7) the hearer’s reliance on the representation being true; (8) the hearer’s right to
rely thereon; and (9) the hearer’s consequent and proximately caused injury.” Renaissance
Leasing, LLC v. Vermeer Mfg. Co., 322 S.W.3d 112, 131-32 (Mo. 2010).
Further, Fed. R. Civ. P. 9(b) requires a party to “state with particularity the circumstances
Conclusory allegations that a defendant’s conduct was fraudulent and
deceptive are not sufficient to satisfy the rule. Drobnak v. Andersen Corp., 561 F.3d 778, 783
(8th Cir. 2009).
The plaintiff must plead “such matters as the time, place and contents of false
representations, as well as the identity of the person making the misrepresentation and what was
obtained or given up thereby.” Freitas v. Wells Fargo Home Mortg., Inc., 703 F.3d 436, 439 (8th
Cir. 2013) (quoting Abels v. Farmers Commodities Corp., 259 F.3d 910, 920 (8th Cir. 2001)).
“In other words, Rule 9(b) requires plaintiffs to plead the who, what, when, where, and how: the
first paragraph of any newspaper story.” Id. (quoting Summerhill v. Terminix, Inc., 637 F.3d
877, 880 (8th Cir. 2011)).
In Count I, the Harts allege that Wells Fargo “at various times” “knowingly
misrepresented” “the nature and terms of the loan; … that the loan was a good financial decision
for [the Harts]; … the modification process of the loan; and the grossly inflated value of [their
home] that [Wells Fargo] used to justify the loan.” Doc. 1-2, p. 4 of 14, ¶ 24. They further
allege that Wells Fargo knowingly or fraudulently induced them to take out the loan, knowing
they “were unlikely to ever be able to pay [it] off.”
Id., at ¶ 25.
Wells Fargo also falsely
represented that a loan modification would “become considered, granted, and/or permanent if
[the Harts] paid the mortgage amount, on time and in full[,]” and such representations “directly
contradicted Defendants’ own policies and procedures.”
Id., at ¶ 26.
Also, Wells Fargo
represented to the Harts that they were “still on a trial modification course, when in fact,” their
“payments were still be recorded as insufficient.” Id.
The Harts do not plead sufficient facts to establish the elements of a fraud claim.
example, they fail to allege the terms of the loan they are referring to and when it was taken out,
or the terms of the temporary modification they obtained. They do not allege the time, place and
contents of the allegedly false representations, the identity of the person making the
misrepresentations, and what they gave up as a result of each such representation.
They do not
allege what Wells Fargo’ policies and procedures were, nor indicate how the alleged
misrepresentation violated them.
Thus, the Harts’ allegations that Defendants’ conduct was fraudulent are merely
conclusory, and they fail to state a claim for fraudulent misrepresentation. 3
A claim for negligent misrepresentation requires a plaintiff to plead facts sufficient to
establish that: “(1) that the speaker supplied information in the course of his business;
(2) because of the speaker's failure to exercise reasonable care, the information was false; (3) the
information was intentionally provided by the speaker for the guidance of limited persons in a
particular business transaction; (4) the hearer justifiably relied on the information; and (5) due to
the hearer’s reliance on the information, the hearer suffered a pecuniary loss.”
Leasing, 322 S.W.3d at 134.
The Complaint does not include any facts reflecting who the speaker was or that the
speaker supplied information in the course of his business, the first element of the claim.
does the Complaint include any facts about the speaker’s failure to exercise reasonable care, the
Furthermore, the Complaint does not allege facts showing the Harts suffered a
pecuniary loss due to their reliance on the information, the fifth element.
To the contrary, the
Harts allege their house suffered a severe loss in value from the time of its purchase, that
attempts to refinance it proved futile, and that they lacked income with which to pay their loan
The heading of Count I includes “deceit.” Missouri case law has long treated
“fraudulent misrepresentation" and "deceit" interchangeably, and as involving the same
elements. See, e.g., People's Nat'l Bank v. Cent. Trust Co., 179 Mo. 648, 652 (1904) ("This is a
suit for damages, founded on alleged fraudulent misrepresentations. It is what is commonly
called an action for deceit.") See also Ellenburg v. Edward K. Love Realty Co., 332 Mo. 766,
771 (1933) ("In actions at law to recover damages for fraud and deceit, it must be shown that
false representations were made, with knowledge of their falsity and with a fraudulent intent.")
Therefore, the Harts’ claim for deceit fails for the same reasons as the claim for fraudulent
due to job loss and living expenses, as well as a high interest rate. Thus, the Harts fail to provide
sufficient facts to support a claim for negligent misrepresentation.
Accordingly, Count I is dismissed for failure to state a claim.
Count II: Negligence
A claim for negligence requires proof of: (1) a legal duty of the defendant to protect the
plaintiff from injury, (2) breach of the duty, (3) proximate cause, and (4) injury to the plaintiff.
Nickel v. Stephens Coll., 480 S.W.3d 390, 400 (Mo. App. 2015).
The Harts claim that Wells Fargo “owed a duty of care to avoid foreseeable injury to
Plaintiffs’ person or property,” and “a duty to competently and reasonably work with Plaintiffs in
their efforts to modify their loan,” Doc. 1-2, p. 5 of 14, at ¶ 33.
They cite no Missouri law
suggesting that a lender, as an incident of the relationship created by the execution of a
promissory note, has these duties, and the Court has located none.
Under Missouri law, the
contractual relationship between a lender and borrower does not alone establish a tort duty on the
part of the lender, Wivell v. Wells Fargo Bank, N.A., 773 F.3d 887, 900 (8th Cir. 2014), nor has
Missouri ever recognized a mere breach of contract as providing a basis for tort liability,
Preferred Physicians Mut. Mgmt. Grp. v. Preferred Physicians Mut. Risk Retention, 918 S.W.2d
805, 814 (Mo. App. W.D. 1996).
Furthermore, a lender and borrower ordinarily have a non-
fiduciary, arm’s length relationship that does not give rise to a duty that would support a
Wivell, 773 F.3d at 900; see also Centerre Bank of Kansas City, N.A. v.
Distributors, Inc., 705 S.W.2d 42, 53 (Mo. App. 1985) (“There is no confidential or fiduciary
relationship between a bank and a customer borrowing funds.”).
Thus, the pleadings are naked assertions without sufficient factual or legal support.
Count II is dismissed for failure to state a claim.
Count III: Violation of Unfair Competition Laws
In Count III, the Harts allege Wells Fargo’ acts were “unlawful business practices in that
they violate the state and federal law, including but not limited to violations of RESPA and state
of Missouri statutes alleged in this Complaint.” Id., p. 6 of 14, ¶ 36. Later in the same count, the
allege that Defendants failed to perform their “responsibilities under HAMP[.]” Id. at ¶ 37.
RESPA, or the Real Estate Settlement Procedures Act, is a federal, consumer protection
law that imposes certain obligations and prohibitions on loan servicers with respect to the loans
More specifically, it applies to “federally related mortgage loans,” addressing
disclosures, notices of loan transfer, treatment of loan payments during transfer, duty to respond
to borrower inquiries or “qualified written requests,” and administration of accounts, 12 U.S.C.
§ 2605; prohibiting kickbacks and unearned fees, § 2607; and prohibiting a seller from requiring
title insurance to be purchased from a particular title company, § 2608.
The Harts fail to allege that their loan was a federally related mortgage loan, which is a
fatal omission. See Hallquist v. United Home Loans, Inc., 2012 WL 1980656, at *5 (W.D. Mo.
June 1, 2012) (citing Gardner v. First American Title Ins. Co., 294 F.3d 991, 993 (8th Cir.
2002)), aff’d 715 F.3d 1040 (8th Cir. 2013). Nor do they allege sufficient factual allegations to
provide the grounds on which their RESPA claim rests, let alone which portion of RESPA they
claim Wells Fargo violated.
The Harts’ allegations include, for example, that Wells Fargo
engaged in a “pattern and practice of failing to perform loan servicing functions”; “fail[ed] to
properly supervise…agents and employees”; “fail[ed] to communicate accurately or consistently
with Plaintiffs about the status of their loan modification application”; “misrepresented and
omitted material facts” so as to cause the Harts to “enter into a sham process” for modification or
refinancing; and “unfairly” denied the Harts a permanent loan modification. Doc. 1-2, pp. 6-7 at
14, ¶¶ 37-38 and 40.
The allegations are merely conclusory.
Count III fails to state a claim
The vast majority of courts, including the district courts in Eighth Circuit, have held that
HAMP, or the federal government’s Home Affordable Modification Program, does not provide a
private cause of action for borrowers. See Reitz v. Nationstar Mortg., 954 F.Supp.2d 8070, 881
(E.D. Mo. 2013) (and cases cited therein).
The Court sees no reason to reach a different
conclusion, especially in the absence of any briefing to the contrary.
Count III fails to state a
claim under HAMP.
Finally, nowhere in Count III, or elsewhere in the Complaint, do the Harts cite any
Missouri statutes, let alone identify factual allegations that apply to such unspecified statutes, in
connection with Count III.
The naked assertion of violation of unspecified state statutes is
insufficient to state a claim under Missouri law.
Count III is therefore dismissed in its entirety.
Count IV: Declaratory relief
Although Count IV is labeled as a claim for injunctive relief, it is a claim for declaratory
The Harts allege Wells Fargo thwarted their attempts to obtain a permanent loan
modification because Wells Fargo would not have a meaningful discussion about modification
They then request a declaration that they did not breach their obligations to Wells
Fargo and that Wells Fargo “wrongfully placed” them in default. Doc. 1-2, p. 8 of 14, at ¶ 46.
A claim for declaratory relief requires a plaintiff to plead and prove that a justiciable
controversy exists and that the plaintiff has no adequate remedy at law.
Midwest Freedom Coal,
LLC v. Koster, 398 S.W.3d 23, 25 (Mo. App. 2013). See also State ex rel. Am. Eagle Waste
Indus. v. St. Louis County, 272 S.W.3d 336, 340 (Mo. App. 2008) (to state a claim for
declaratory judgment, the pleading must “invoke substantive legal principles which, if proved,
entitle the petitioner to declaratory relief”).
As discussed throughout this Order, the other five
Counts—I, II, III, V, and VI—consist of naked assertions without sufficient factual or legal
support, and will be dismissed.
The Harts’ allegation in Count IV, that Wells Fargo would not
have a meaningful discussion with them about modification, alleges no factual or legal support.
Inasmuch as the other Counts will be dismissed, permitting Count IV to survive would serve no
Count IV is therefore dismissed.
County V: Reformation
Reformation is an extraordinary equitable remedy. US Bank, N.A. v. Smith, 470 S.W.3d
17, 25 (Mo. App. 2015) (quoting King v. Riley, 498 S.W.2d 564, 566 (Mo. 1973)). In Missouri,
the “ʻaccepted rule’” is that a court “ʻwill reform a written instruments so as to make [it] speak
the real agreements of the parties in cases in which by mistake or misprision of the scrivener the
writing failed to do so[.]’”
Reformation is “available upon a showing that, due to either
fraud or mutual mistake, the writing fails to accurately set forth the terms of the actual
agreement or fails to incorporate the true prior intention of the parties.” Id. (internal quotations
and citations omitted).
“In seeking reformation, it must be established that a mistake occurred
that caused the contract language to differ from what the parties intended in their agreement.” Id.
(internal quotations and citations omitted).
Thus, the party seeking reformation must show, by
clear, cogent and convincing evidence, that: 1) a preexisting agreement existed between the
parties, having terms in accordance with the proposed reformation; 2) the mistake; and 3) the
mutuality of the mistake.
Id. (internal quotations and citations omitted).
The Harts allege they are entitled to reformation because Wells Fargo “[was] able to
convince [them] that adequate value existed in [their home] such that the amount of the actual
loan was justified by the value of [their home] and that the payments towards this loan would be
reasonable based upon [the Harts’] reported household income.” Doc. 1-2, p. 9 of 14, ¶ 50. The
Harts do not allege a preexisting agreement that conformed to the terms of the proposed
reformation, nor do they allege mutual mistake.
Neither does Count V state sufficient facts to state a claim for reformation based on
Rule 9 requires circumstances constituting fraud to be plead with particularity.
Count provides no particulars such as the time, place and contents of the representations, or the
identity of the person making any such representations.
Therefore, the Complaint fails to state a claim for reformation and Count V is dismissed.
Count VI: Breach of Implied Covenant of Good Faith and Fair Dealing
The Harts allege that Wells Fargo breached the implied covenant of good faith and fair
dealing in the modification of the loan on their home, by misleading them into believing their
home was sufficient collateral for the loan and that, based upon their credit score and reported
household income, they would be able to afford the monthly payments. The Harts further allege
that Wells Fargo used a false or inflated appraisal “to legitimize an overvaluation of the [home]
and its approval of a loan in excess of the [home’s] value.” Doc. 1-2, p. 10 of 14.
Missouri law recognizes an implied covenant of good faith and fair dealing in every
contract. Arbos v. Jefferson Bank & Trust Co., Inc., 464 S.W.3d 177, 185 (Mo. 2015) (en banc).
The covenant’s purpose is to prevent one party from using an agreement’s “express terms” to
“deny the other party the expected benefit of the contract” or to “evade the spirit of the
transaction.” Hawthorn Bank and Hawthorn Real Estate, LLC v. F.A.L. Invest, LLC, 449 S.W.3d
61, 66-67 (Mo. Ct. App. 2014) (internal quotation marks omitted).
Count VI fails to state a claim upon which relief may be granted for at least two reasons.
First, the pleadings refer to activities or negotiations that took place in advance of the loan: the
allegedly false or inflated appraisal, and Wells Fargo’s misleading the Harts into thinking they
could afford to make monthly payments on the loan and had sufficient collateral.
implied covenant of good faith and fair dealing relates to express terms of a contract, not
activities that took place prior to execution of a contract. The covenant is not “an ever flowing
cornucopia of wished-for legal duties; indeed, the covenant cannot give rise to obligations not
otherwise contained in a contract’s express terms.” Comprehensive Care Corp. v. RehabCare
Corp., 98 F.3d 1063, 1066 (8th Cir. 1996) (quoting Glass v. Mancuso, 444 S.W.2d 467, 478 (Mo.
1969)). See also Koger v. Hartford Life Ins., Co., 28 S.W.3d 405, 412 (Mo. Ct. App. 2000) (the
covenant arises pursuant to contract and is in fact a “contract remedy”).
The claim also fails
because the Harts do not plead sufficient factual allegations to provide the grounds on which
such a claim could rest, such as allegations relating to the relevant, express terms of a contract.
Accordingly, Count VI is dismissed.
For the reasons set forth above, Defendants’ Motion to Dismiss, Doc. 12, is granted.
s/ Nanette K. Laughrey
NANETTE K. LAUGHREY
United States District Judge
Dated: October 11, 2016
Jefferson City, Missouri
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