SARLO v. WELLS FARGO BANK, N.A.

Filing 23

OPINION. Signed by Chief Judge Jerome B. Simandle on 3/23/2015. (tf, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

LAWRENCE SARLO and SUSAN SARLO,
Plaintiffs,
v.

HONORABLE JEROME B. SIMANDLE

WELLS FARGO BANK, N.A.
Civil No. 12-5522 (JBS/KMW)
Defendant.

OPINION
APPEARANCES:
Michael H. Gaier, Esq.
SHAFFER & GAIER, LLC
21 Ellis Street, Suite 200
Haddonfield, NJ 08033
Attorney for Plaintiffs Lawrence Sarlo and Susan Sarlo
Barbara K. Hager, Esq.
REED SMITH LLP
1717 Arch Street, Suite 3100
Philadelphia, PA 19103
-andDerek J. Baker, Esq.
REED SMITH
Princeton Forrestal Village
136 Main Street, Suite 250
Princeton, NJ 08540
-andJenai H. St. Hill, Esq.
REED SMITH LLP
2500 One Liberty Place
1650 Market Street
Philadelphia, PA 19103
Attorneys for Defendant Wells Fargo Bank, N.A.
SIMANDLE, Chief Judge:
I.

INTRODUCTION
Plaintiffs Lawrence and Susan Sarlo bring this action

against Defendant Wells Fargo Bank, N.A., alleging that
Defendant induced Plaintiffs to stop making their monthly
mortgage payments so that Plaintiffs could qualify for a loan
modification, but later foreclosed on Plaintiffs’ home without
ever providing the promised modified loan or even evaluating
Plaintiffs for the modified loan. Plaintiffs allege, among other
things, breach of contract, breach of the implied covenant of
good faith and fair dealing, negligent representation, slander
of credit, and violation of the New Jersey Consumer Fraud Act.
Defendant has filed for summary judgment. Because a reasonable
factfinder could conclude on the evidence that Defendant agreed
to assess Plaintiffs’ eligibility for a loan modification and
failed to properly do so, the Court will allow Plaintiffs’
claims for breach of contract and violation of the New Jersey
Consumer Fraud Act to proceed upon these aspects of Plaintiffs’
contract and Consumer Fraud Act claims, and will grant summary
judgment on the remaining claims.
II.

BACKGROUND
A. Summary Judgment Record
The Court begins with the summary judgment record.
Plaintiffs Lawrence and Susan Sarlo have owned a home in

Wildwood, New Jersey since 2002. In 2003, they decided to
refinance their mortgage to obtain a lower interest rate and
executed a promissory note and mortgage in the sum of $288,000,
2

with an annual interest rate of 6.25% and monthly payment of
$1,773.27. (Note, Def. Ex. A [Docket Item 19-9]; Def. Statement
of Material Facts (“SMF”) ¶ 1; Pl. Counter Statement of Facts
(“Counter SMF”) ¶¶ 27-28.)1
Plaintiffs paid their monthly installment payments in
accordance with the terms of the mortgage for approximately six
years until 2009. (Counter SMF ¶ 29.) According to Defendant
Wells Fargo, the loan entered into default on January 1, 2009.
(Cert. of Alissa Deopp. (“Deopp Cert.”) [Docket Item 19-8] ¶
18.)
On February 6, 2009, Plaintiff Lawrence Sarlo called Wells
Fargo to ask about refinancing their loan to lower their monthly
mortgage payments. A Wells Fargo representative told Plaintiff
that he was “pre-qualified” for a loan modification. (Rowles
Dep., Pl. Ex. D [Docket Item 22] 39:17-19; Counter SMF ¶ 32.) He
explained that there was a new program “put forth by Obama” that
would allow Plaintiffs to “lower [their] interest rate and
spread the loan out over a longer period of time.” (Lawrence
Sarlo Dep., Pl. Ex. B [Docket Item 22], 73:22-75:4.)2 According
to Sarlo, the representative told him that the interest rate

1

The mortgage was assigned to Defendant Wells Fargo Bank, N.A.
(“Wells Fargo”) on June 2, 2009. (Assignment of Mortgage Notice,
Def. Ex. C to Deopp Cert. [Docket Item 19-11]; SMF ¶ 3.)
2 The page numbers from the Lawrence Sarlo deposition are taken
from the page numbers indicated at the top of the filing at
Docket Item 22.
3

would be as low as two and-a-half percent, which Plaintiffs
wanted because it would decrease their monthly loan payment.
(Id. 77:18-78:7.) Plaintiff testified,
. . . I asked him what we need to do to be part of that
program, and he told me that I had to pay a fee of $2200
and some odd dollars which was more than my mortgage
payment. And I had to stop making my payments for my
mortgage. And I questioned him. Why would I have to stop
making my mortgage payments? He said, It’s part of the
program. Don’t worry.
(Id. 75:5-12.) Plaintiff Susan Sarlo also testified that her
husband told her Wells Fargo “said we would have to stop making
payments on our mortgage.” (Susan Sarlo Dep., Def. Ex. 3 [Docket
Item 19-6] 9:18-20.)
A loan verification analyst for Defendant Wells Fargo,
Susan Rowles, testified that a review for a loan modification
would not be made “unless there was a delinquency,” and that
“delinquency was one of the requirements” for loan modification.
(Rowles Dep. 42:4-6; 43:13-16.) When asked whether Defendant
would instruct representatives “to encourage borrowers to be
delinquent in the mortgage payment if they wanted to get a loan
modification,” Rowles answered no. (Id. 47:2-7.) When asked
whether representatives would be “acting within [their]
authority at Wells Fargo” if they told borrowers “that they
could get a loan modification if their loan were delinquent,”
Rowles testified, “Well, that’s a fact. . . . If the loan was
delinquent you can get a modification. It does not mean not to
4

pay your payment. It’s not the same thing, so that would just be
stating a fact.” (Id. at 47:11-21.)
According to Wells Fargo’s notes regarding the phone call,
Plaintiffs were pre-qualified for a loan modification “based on
verbal information provided by [Plaintiffs]” and were set up for
loss mitigation. (Id. 38:13-18.) The notes also stated,
“Informed borrower that terms are not final. Terms may vary upon
review and will be reviewed for modification.” (Id. 35:25-36:2.)
At Plaintiffs’ request, Defendant sent Plaintiffs a follow-up
letter regarding the loan modification. The letter stated that
Defendant was “considering a program that may assist you in
curing the delinquency on your loan.” The program “would
reschedule your loan balance to set up a new payment and provide
you with the opportunity for a fresh start.” The letter went on
to explain,
Please be advised this letter is not a guarantee or
approval of the loan modification. An initial payment of
[$]2415.00, that is due on 2009-02-25. . . . If you are
not approved for a loan modification, the initial
payment will be returned to you. Once Wells Fargo
receives the item listed above, we will complete an
analysis of your situation and seek the appropriate
approvals. . . . If the modification is approved, you
will receive additional information that explains the
terms of the agreement . . . .
Please note that until such time as you are approved
for a modification, normal default servicing will
continue which includes any foreclosure action that may
be in process. . . . You are responsible to pay any fees
associated with this action that continue to accrue
until your loan modification is approved.
5

(Feb. 6, 2009 Letter, Def. Ex. E [Docket Item 19-3].)
Plaintiff Lawrence Sarlo testified that he gave Defendant
information over the phone about his income but Defendant never
asked for documents, which they were prepared to send in. Sarlo
also did not recall having to sign anything. (Lawrence Sarlo
Dep. 76:17-77:3; 78:18-23; 79:6-12 (“I don’t think there was
anything to sign, no. It was just that check.”).) Defendant only
asked Plaintiffs to send a check for $2,415.00, which they did
at the end of February 2009. (Pl. Ex. C [Docket Item 22].) The
check was placed in a suspense account pending review for loan
modification. (Rowles Dep. 48:17-59:11.)
Plaintiffs were told that they would hear from Defendant
about the loan modification in six to twelve weeks and in the
meantime stopped their monthly loan payments while they waited
for a response. Plaintiffs called several times to find out if
Defendant needed any additional information but were told to
“just be patient.” (Lawrence Sarlo Dep. 76:11-21.)
At some point between February and June, Defendant offered
Plaintiffs a loan modification over the phone. The loan required
monthly payments of approximately $2600, which Plaintiffs turned
down because it was higher than their original payment.
(Lawrence Saro Dep. 79:11-19; Counter SMF ¶ 6.) Defendant told
Plaintiffs to write a letter declining the modification, which
Plaintiffs did, and Defendant would “reevaluate” them anew. (Id.
6

79:19-80:17.)
Rowles testified that Plaintiffs were evaluated for and
denied the Home Affordable Modification Program (“HAMP”) in or
around April 2009. (Rowles Dep. 59:22-24.) Sarlo stated that he
had never heard of the term “HAMP” and had never discussed a
HAMP loan with Defendant. There are no documents in the record
showing that Plaintiffs received notification that they were
evaluated for a HAMP loan.3
Defendant filed a foreclosure action on June 3, 2009;
however, Lawrence Sarlo testified that in early June, he called
Defendant and told the representative on the phone that he and
his wife were still “waiting for a decision” about the loan
modification. (Id. 78:11-13.) Defendant’s representative told
him that he and his wife did not qualify for a loan modification
because they earned too much money, but that response may have
been based on incorrect income information from another
borrower. (Id. 78:15-17.) According to Sarlo, Defendant’s
representative told him that he was not qualified for loan
modification because Sarlo and his wife made $12,500 a year when
in fact they made much less. Sarlo told the representative his
true income and the representative told him that she “had [his]

3

Plaintiff asserts that his claims are not based on the denial
of a HAMP loan because he never received anything about HAMP.
(Counter SMF ¶ 6.)
7

file mixed up with somebody else’s.” (Lawrence Sarlo Dep. 78:2479:5.)
Defendant sent Plaintiffs a letter dated June 2, 2009,
offering them a “HomeSaver Advance” loan for the purpose of
“pay[ing] off past due payments to bring the account current.”
(June 2, 2009 Letter, Def. Ex. D [Docket Item 19-12], at 8.) The
loan covered five months’ delinquent mortgage payments and fees
incurred as a result of the delinquency, which together totaled
$14,929.25. (Id. at 4.) The loan required monthly payments of
$120.80 at a yearly interest rate of 5%. According to the
Frequently Asked Questions published by Defendant, a HomeSaver
Advance loan “does not affect the original mortgage at all” and
“is independent from [the] primary mortgage note.” (Id. at 8.)
Defendant asserts that Plaintiffs rejected this offer. (SMF ¶
7.) Plaintiff Lawrence Sarlo did not recall seeing the HomeSaver
Advance letter. (Lawrence Sarlo Dep. 101:23-102:6.)
On June 3, 2009, one day after Wells Fargo offered
Plaintiffs the HomeSaver Advance loan, Defendant filed a
mortgage foreclosure action in the Superior Court of New Jersey.
(SMF ¶ 8.) Defendant did not return Plaintiffs’ check for
$2,415.00 before filing for foreclosure. (Counter SMF ¶ 5.)
Nothing in the record suggests that Plaintiffs ever received
their deposit back, and Defendant has not stated that the fee
was ever returned to Plaintiffs. Plaintiffs’ previous attorney,
8

who represented them in the foreclosure action, failed to keep
Plaintiffs abreast of the lawsuit. (Sarlo Cert., Pl. Ex. E
[Docket Item 22] ¶¶ 6-8.) On September 3, 2009, the Superior
Court entered default judgment in favor of Defendant Wells
Fargo. The action is presently stayed in the Office of
Foreclosure pending resolution of this case. (SMF ¶¶ 11-12.)4
Plaintiff Lawrence Sarlo testified that since the events in
2009, he and his wife have had many sleepless nights and “have
been put through literally hell.” (Lawrence Sarlo Dep. 97:1619.) He stated, “Between us arguing over the finances, us, me
trying to figure out a way to just get this done and over with.
. . . As far as I’m concerned, it was the worst phone call in my
life.” (Id. 97:20-24.) Plaintiffs did not seek medical treatment
for the emotional distress caused by the incident. (Id. 98:118.)
Sarlo also testified that as a result of these events, he
and his wife have been unable to secure college loans for their

4

Before obtaining an attorney to represent them, Plaintiffs
filed an answer in which they wrote that when they first called
Wells Fargo to discuss refinancing, “no help was even
entertained at that time other than ‘only if you are late.’”
(Lawrence Sarlo Dep. 87:17-23.) Plaintiff Lawrence Sarlo stated
that although the phrase “only if you are late” was written in
quotations, it was not a direct quote from the representative he
spoke with, but was Sarlo’s interpretation of the
representative’s statement that he needed to stop making
payments. (Id. 90:13-21.) Sarlo stated that he placed the phrase
in quotations to “highlight[] just an interpretation on my side
and what I was saying.” (Id. 91:12-14.)
9

children, their credit score has declined, and their credit card
interest rates and minimum payments have risen. (Id. 83:3-5;
84:4-20.)
B. Procedural Background
Plaintiffs Lawrence and Susan Sarlo filed their Complaint
against Wells Fargo Bank, N.A. in this Court on September 4,
2012 [Docket Item 1]. The Complaint asserts violations of the
Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692
(Count Five); the Real Estate Settlement Procedures Act
(“RESPA”), 12 U.S.C. § 2605 (Count Eight), and seven claims
under New Jersey law.
Defendant filed for summary judgment on all counts. [Docket
Item 19.] Plaintiffs consent to the dismissal of their claims
under the FDCPA and RESPA [Docket Item 22], and the Court will
therefore grant summary judgment with respect to Counts Five and
Eight. An accompanying order will be entered.
Plaintiffs oppose the dismissal of their state law claims.
No reply brief was filed in the case. Remaining before the Court
are the claims asserting breach of contract (Count One); breach
of the implied covenant of good faith and fair dealing (Count
Two); negligent misrepresentation (Count Three); violations of
the New Jersey Consumer Fraud Act (“CFA”), N.J.S.A. 56:8-1, et
seq. (Count Four); slander of credit (Count Six); promissory
estoppel (Count Seven); and negligent infliction of emotional
10

distress (Count Eight). The Court exercises jurisdiction over
these claims under 28 U.S.C. § 1332.
III. STANDARD OF REVIEW
At summary judgment, the moving party bears the initial
burden of demonstrating that there is no genuine dispute as to
any material fact and the movant is entitled to judgment as a
matter of law. Fed. R. Civ. P. 56(a); accord Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986). Once a properly supported
motion for summary judgment is made, the burden shifts to the
non-moving party, who must set forth specific facts showing that
there is a genuine issue for trial. Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 250 (1986). In reviewing a motion for
summary judgment, the court is required to examine the evidence
in light most favorable to the non-moving party, and resolve all
reasonable inferences in that party's favor. Hunt v. Cromartie,
526 U.S. 541, 552 (1999); Wishkin v. Potter, 476 F.3d 180, 184
(3d Cir. 2007).
A factual dispute is material when it “might affect the
outcome of the suit under the governing law,” and genuine when
“the evidence is such that a reasonable jury could return a
verdict for the nonmoving party.” Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986). The non-moving party “‘need not
match, item for item, each piece of evidence proffered by the
movant,’” but must present more than a “mere scintilla” of
11

evidence on which a jury could reasonably find for the nonmoving party. Boyle v. Cnty. of Allegheny Pennsylvania, 139 F.3d
386, 393 (3d Cir. 1998) (quoting Anderson v. Liberty Libby,
Inc., 477 U.S. 242, 252 (1986)). Where the record taken as a
whole could not lead a rational trier of fact to find for the
nonmoving party,” no genuine issue for trial exists and summary
judgment shall be granted. Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 587 (1986) (citation omitted).
IV. DISCUSSION
A. The Entire Controversy Doctrine
Defendant Wells Fargo first argues that Plaintiffs’ claims
in this suit are barred by the entire controversy doctrine.
New Jersey’s entire controversy doctrine embodies the
notion that “‘the adjudication of a legal controversy should
occur in one litigation in only one court.’” DiTrolio v.
Antiles, 662 A.2d 494, 502 (N.J. 1995) (quoting Cogdell v.
Hospital Ctr., 560 A.2d 1169, 1172 (N.J. 1989)). Under this
principle, “‘all parties involved in a litigation should at the
very least present in that proceeding all of their claims and
defenses that are related to the underlying controversy.’” Id.
The entire controversy doctrine requires a party to bring in one
action “all affirmative claims that [it] might have against
another party, including counterclaims and cross-claims,” or be
forever barred from bringing a subsequent action involving the
12

same underlying facts. Rycoline Products, Inc. v. C & W
Unlimited, 109 F.3d 883, 885 (3d Cir. 1997); Circle Chevrolet
Co. v. Giordano, Halleran & Ciesla, 662 A.2d 509, 513 (N.J.
1995). A party “cannot withhold part of a controversy for later
litigation even when the withheld component is a separate and
independently cognizable cause of action.” In re Mullarkey, 536
F.3d 215, 229 (3d Cir. 2008).
The entire controversy doctrine is applicable to
foreclosure proceedings, but its application is narrower and
extends only to “germane” counterclaims. Leisure Tech.-Northeast
v. Klingbeil Holding Co., 349 A.2d 96, 98-99 (N.J. Super. Ct.
App. Div. 1975). New Jersey Rule of Court 4:64–5 provides, in
part,
Unless the court otherwise orders on notice and for good
cause shown, claims for foreclosure of mortgages shall
not be joined with non-germane claims against the
mortgagor or other persons liable on the debt. Only
germane counterclaims and cross-claims may be pleaded in
foreclosure actions without leave of court. Non-germane
claims shall include, but not be limited to, claims on
the instrument of obligation evidencing the mortgage
debt, assumption agreements and guarantees.
N.J. Court R. 4:64-5. The New Jersey Supreme Court held in
Leisure Technology that Rule 4:64-5 “undoubtedly was intended to
limit counterclaims in foreclosure actions to claims arising out
of the mortgage transaction which is the subject matter of the
foreclosure action.” Id. at 98. In that case, the defendants
filed a counterclaim to a mortgage foreclosure action asserting
13

that the plaintiff’s false representations to a development
planning board subsequent to the execution of the mortgage
caused defendants to lose out on an opportunity to sell some of
their land and led to their inability to make mortgage payments.
Id. at 97. The court found that the defendants’ counterclaim was
germane to the foreclosure action, because “the thrust of the
counterclaim [was] the assertion that plaintiff had breached the
underlying agreement in relation to which the mortgage was
executed and interfered with defendants’ rights under that
agreement.” Id. at 99.
Plaintiffs’ claims in this case are not germane within the
meaning of Rule 4:64-5 and consequently are not barred by the
entire controversy doctrine. The claims in this case – including
breach of contract, negligent representation, breach of good
faith and fair dealing, fraud, and slander of credit – arise
entirely out of Defendant’s alleged promise in 2009 to provide a
loan modification. By contrast, the subject of the foreclosure
action was whether Plaintiffs had fulfilled their obligations
under the 2003 mortgage contract. That question is separate from
whether Defendant made a new loan offer in 2009 that Plaintiffs
accepted and relied upon to their detriment. Although
Plaintiffs’ actions, in relying upon Defendant’s promise of a
loan modification, contributed to the foreclosure, “[a] causal
relationship between the two sets of claims is not conclusive
14

under New Jersey Law” to bar litigation under the entire
controversy doctrine. Fields v. Thompson Printing Co., Inc., 363
F.3d 259, 266 (3d Cir. 2004). Plaintiffs’ claims in this suit –
and the asserted damages arising out of the failure to provide a
loan modification – have little to do with the enforceability of
the 2003 mortgage contract. Plaintiffs’ claims are therefore not
barred by the entire controversy doctrine.
B. Summary judgment will be denied on Plaintiffs’ breach of
contract claim based on Defendant’s failure to evaluate
Plaintiffs for a loan modification.
Plaintiffs claim that they entered into a contract with
Defendant for a loan modification, and that Defendant breached
that contract when it failed to provide a loan modification with
a lower interest rate and failed to evaluate Plaintiffs for a
loan modification at all. (Pl. Br. 7-8.)
A party alleging a breach of contract must establish (1)
the existence of a contract; (2) a breach of that contract; (3)
damages flowing from the breach; and (4) that he himself
performed his own contractual duties. See Video Pipeline Inc. v.
Buena Vista Home Entm’t, Inc., 210 F. Supp. 2d 552, 561 (D.N.J.
2002) (Simandle, J.) (citing Pub. Serv. Enter. Group, Inc. v.
Phila. Elec. Co., 722 F. Supp. 184, 219 (D.N.J. 1989).
Defendant argues that there were no other valid agreements
between the parties aside from the mortgage and note entered
into in 2003. They also argue that Plaintiffs were not entitled
15

to a HAMP loan. (Def. Br. 5-6.) Plaintiffs contend that whether
or not they were entitled to a loan under HAMP is irrelevant to
their breach of contract claim, which is based upon an agreement
for a loan modification in February 2009. Specifically,
Plaintiffs argue that Defendant offered a loan modification
program, orally and in writing, for “a new loan with a lower
interest rate (‘as low as 2.5%’) with lower monthly installment
payments,” and Plaintiffs accepted the offer when they tendered
a check for $2,415.00. (Pl. Br. 7.)
Defendant is entitled to summary judgment on Plaintiffs’
first breach of contract theory. Even after giving Plaintiffs
the benefit of all favorable inferences, the evidence is
insufficient to establish that Defendant promised to modify
Plaintiffs’ loan.
First, the February 6, 2009 letter from Defendant to
Plaintiffs clearly showed that Plaintiffs were merely being
considered for a loan modification. The letter specifically
stated that Defendant was “considering” Plaintiffs for a
modified loan, and further stated that it would “complete an
analysis of your situation” once it received the initial
$2,415.00 payment. Although the letter noted that Defendant
would “seek the appropriate approvals” once it received payment,
the language made clear that approval was not guaranteed. The
letter stated that Plaintiffs would receive further information
16

about the loan modification “[i]f the modification is approved,”
and also advised Plaintiffs that it “[was] not [a] guarantee or
approval of the loan modification.” Finally, it cautioned that
“until such time as you are approved for a modification, normal
default servicing will continue.” (Def. Ex. E.)
Rowles’ testimony provides additional evidence that
Defendant did not promise a loan modification. Defendant’s
representative’s notes regarding the February 6, 2009 phone call
indicate that Plaintiffs were “pre-qual based on verbal
information provided by the borrower, in which case they would
then have to be reviewed for the mod[ification].” (Rowles Dep.
38:13-18.) The representative had also written, “Informed
borrower that terms are not final. Terms may vary upon review
and will be reviewed for modification.” (Id. 35:25-36:2.) These
notes suggest that Plaintiffs were specifically told by
Defendant that further evaluation was required, consistent with
the written advice in Defendant’s February 6, 2009 letter above.
Finally, the evidence suggests that Plaintiffs themselves
knew that they still needed to be approved for the loan
modification even after they paid the $2,415.00. Plaintiff
Lawrence Sarlo testified that after he sent Defendant the
initial payment, he called several times to find out if
Defendant needed any additional information. He also stated that
he was still “waiting for a decision” when he called Defendant
17

again in June. (Lawrence Sarlo Dep. 76:11-21; 78:11-13.)
Given the evidence above, no reasonable jury could find
that Defendant promised Plaintiffs they would receive a loan
modification upon receipt of the initial payment. The Court
finds that no valid contract for a loan modification had been
formed.
The Court will, however, deny summary judgment on the
breach of contract claim based upon failure to evaluate
Plaintiffs for a loan modification. A reasonable jury could
infer based on the evidence that there was an agreement between
the parties to evaluate the Sarlos for a loan modification with
a lower monthly payment. Here, Sarlo testified – and Defendant
does not dispute – that Defendant told Plaintiffs over the phone
that they were pre-qualified for a modified loan with an
interest rate “as low as 2.5%” leading to lower monthly
payments, and that Plaintiffs would be considered for the
modification if they sent in an initial payment and were
delinquent on loan payments.5 Plaintiffs then sent in a check for
the amount sought, which Defendant accepted, thus providing

5

Although Plaintiffs assert that Defendant’s representative told
them to “stop making monthly payments” in order to qualify for a
loan modification, Rowles denied that Wells Fargo
representatives were told to encourage borrowers to be
delinquent in the mortgage payments to get a loan modification.
Regardless of the precise language Defendant used, neither party
disputes that the prerequisite to applying for a loan
modification was to be delinquent on loan payments.
18

consideration for the agreement to evaluate Plaintiffs’ loan
modification request. A reasonable jury could therefore find
that Defendant made an offer which Plaintiffs accepted by
tendering a check for payment.
Giving Plaintiffs the benefit of all favorable inferences,
the evidence could also reasonably suggest that Defendant
breached its promise to consider Plaintiffs for a loan
modification specifically to lower their monthly mortgage
payments. First, the evidence suggests that Plaintiffs never
heard back from Defendant about the loan modification before
Defendant initiated foreclosure on their home. Although Lawrence
Sarlo admitted to being offered three loan options, none of them
were for a loan with a lower monthly interest rate, which
Defendant had promised to evaluate him for. One loan, the
HomeSaver Advance loan, covered only Plaintiffs’ past due
mortgage payments and, according to Defendant’s own documents,
“[did] not affect the original mortgage at all.” The other loan
offer required a payment of $2,600 per month, nearly $1,000
higher than their original monthly payment. (Lawrence Sarlo Dep.
80:12-13.) When Sarlo objected that this was not the type of
loan modification offer he had been promised, Defendant said it
would come up with a reevaluation to see if Plaintiffs qualified
for a lower interest rate or monthly payment. Although Defendant
appeared to have finally evaluated Plaintiffs in June and
19

informed them that they did not qualify, that decision was
mistakenly based on another person’s income, which Defendant
admitted when it told Plaintiffs over the phone that there was a
“mix-up” in the files. Defendant then initiated foreclosure
before it could assess whether Plaintiffs qualified for a
reduced interest loan based on their actual income. Plaintiffs
assert that they have never been given a decision on the loan
modification, despite their initial payment.6
There is also evidence in the record to suggest that
Defendant never bothered to conduct a proper evaluation for a
loan modification, or that any final response was communicated
to Plaintiffs. Sarlo stated that he called Defendant numerous
times about the loan modification and was told each time that
the process was still underway. He testified that Wells Fargo
never even asked him for supporting documents regarding their
income in the approximately four months before it initiated
foreclosure. Defendant also never returned the initial payment
of $2,415.00 which Plaintiffs submitted in 2009.
Based on this evidence, a reasonable jury could conclude
that Defendant failed to properly assess whether Plaintiffs

6

Although Rowles testified that Defendant evaluated Plaintiff
for a HAMP loan for which Plaintiffs failed to qualify, Sarlo
testified that he did not recall ever hearing anything about
HAMP or whether he qualified for a HAMP loan. Plaintiffs do not
argue that they were owed a loan modification evaluation under
HAMP.
20

qualified for a loan with a lower interest rate and monthly
payment, and breached its obligation to Plaintiffs. Accordingly,
and because Defendant raises no other argument why this claim
should be dismissed, the Court will deny summary judgment on the
breach of contract claim based on a failure to evaluate
Plaintiffs for a loan modification.7
C. Plaintiffs’ claim of breach of the implied covenant of
good faith and fair dealing must be dismissed.
A covenant of good faith and fair dealing is implied in
every contract in New Jersey, regardless of the type of contract
at issue. See Wood v. New Jersey Mfrs. Ins. Co., 21 A.3d 1131,
1140 (N.J. 2011); Wilson v. Amerada Hess Corp., 773 A.2d 1121,
1126 (N.J. 2001); Sons of Thunder, Inc. v. Borden, Inc., 690
A.2d 575, 587 (N.J. 1997). The covenant of good faith and fair
dealing provides that “neither party shall do anything which
will have the effect of destroying or injuring the right of the
other party to receive the fruits of the contract[.]” Kalogeras
v. 239 Broad Ave., L.L.C., 997 A.2d 943, 953 (N.J. 2010)
(citations and internal quotations omitted). A party breaches

7

Plaintiffs state that they have suffered “adverse credit
consequences” because of Defendant’s breach, along with the loss
of $2,415.00. Although the Court will allow Plaintiffs’ claim to
proceed because Plaintiffs have shown damages at least in the
amount of $2,415.00, Plaintiffs will need to submit additional
evidence at trial to prove damages beyond that amount as a
result of Defendant’s failure to properly evaluate them for a
loan modification. It would be premature to rule out the
possibility of damages beyond the $2,415.00 loss.
21

the implied covenant of good faith and fair dealing when it acts
in bad faith or engages in some other form of inequitable
conduct, even where there is no breach of the express terms of
the contract. Avatar Business Connection, Inc. v. Uni-Marts,
Inc., 2006 WL 1843136, at *7 (D.N.J. June 30, 2006); Kapossy v.
McGraw–Hill, Inc., 921 F.Supp. 234, 248 (D.N.J. 1996); see also
McGarry v. Saint Anthony of Padua Roman Catholic Church, 704
A.2d 1353, 1357 (N.J. Super. Ct. App. Div. 1998).
“[T]he [New Jersey] cases note a state of mind or malicelike element to breach of good faith and fair dealing.” Wilson,
773 A.2d at 1130 (quotations and citation omitted). To show bad
faith, “bad motive” by the defendant is essential, and “an
allegation of bad faith or unfair dealings should not be
permitted to be advanced in the abstract and absent improper
motive.” Id.; see also Donnelly v. Option One Mortg. Corp., 2014
WL 1266209, at *16 (D.N.J. Mar. 26, 2014). Exercises of
discretion for “ordinary business purposes” do not constitute
improper motive, and a plaintiff cannot satisfy the “improper
motive” element by merely alleging that a defendant’s
discretionary decisions benefitted the defendant and
disadvantaged the plaintiff. See Hassler v. Sovereign Bank, 644
F. Supp. 2d 509, 518 (D.N.J. 2009) (citing Elliott & Frantz,
Inc. v. Ingersoll-Rand Co., 457 F.3d 312, 329 (3d Cir. 2006));
Wilson, 773 A.2d at 1128.
22

Plaintiffs argue that Defendant breached its duty of good
faith and fair dealing when it told Plaintiffs to stop making
payments with the promise of a “pre-qualified” loan modification
which it never delivered. (Pl. Br. 11.) Plaintiffs argue that
Defendant knew that Plaintiffs would be tempted by the offer and
encouraged Plaintiffs to cease mortgage payments in violation of
the terms of their existing mortgage. (Id. at 11-12.)
The Court will grant summary judgment because no reasonable
jury could find that Defendant acted in bad faith when they
offered the loan program to Plaintiffs. Defendant did not reach
out to Plaintiffs about the program; Sarlo testified that he was
the one who first called Wells Fargo to ask about refinancing
options. Nor is there any evidence that Defendant pressured
Plaintiffs into applying or misrepresented the terms to make the
program more enticing. Plaintiffs point to the fact that
Defendant’s representative told Plaintiffs that they were “prequalified” for the loan, which suggests that they should have
received it, but the statement is not misleading or untrue.
Defendant’s letter regarding the loan modification made clear
that it was not guaranteeing any particular interest rate or
monthly payment, nor was it guaranteeing approval upon payment.
Finally, contrary to Plaintiffs’ suggestion, the Court can find
no evidence that Defendant told Plaintiffs to cease mortgage
payments knowing that it could not offer Plaintiffs a loan
23

modification and knowing that foreclosure would result. Because
nothing in the record suggests that a reasonable fact finder
could conclude that Defendant’s decision was motivated by bad
faith, the Court will grant summary judgment in Defendant’s
favor and dismiss Count Two.
D. Plaintiffs’ claim of negligent representation must be
dismissed.
A claim for negligent representation under New Jersey law
requires (1) an incorrect statement (2) negligently made, (3)
upon which a plaintiff justifiably relied, (4) and which
resulted in economic loss or injury as a consequence of that
reliance. Mason v. Coca-Cola Co., 774 F. Supp. 2d 699, 704
(D.N.J. 2011) (citing H. Rosenblum, Inc. v. Adler, 461 A.2d 138,
142-43 (N.J. 1983)). Plaintiffs contend that Defendant was
negligent in telling Plaintiffs that they were qualified for a
loan modification when in fact further review needed to be
completed.
The Court must dismiss Plaintiffs’ claim because no
reasonable jury could find that Defendant’s statement to
Plaintiffs was incorrect or negligently made. Plaintiffs’ own
assertion is that Defendant’s representative told Plaintiffs
that they were “pre-qualified” for a loan modification. (Pl. Br.
14.) But, as the term itself suggests, to “pre-qualify” someone
for a loan is not a promise to provide them with the loan. The
24

representative noted to Plaintiffs that they could receive an
interest rate “as low as” 2.5%, which further indicates that an
assessment had not yet been completed and no firm offer had been
made. Nor is there anything in the record to suggest that
Plaintiffs believed they would automatically receive a lowerinterest-rate loan upon tendering an initial payment. On the
contrary, Plaintiffs’ own testimony – that they were still
“waiting for a decision” on whether or not they would receive a
loan modification – suggests that neither party thought that
approval was guaranteed. Furthermore, Defendant’s call notes and
its letter to Plaintiffs regarding the loan modification both
show that the terms were not final and Plaintiffs’ application
required further review.
Because the evidence does not reasonably suggest that
Defendant’s statement that Plaintiffs were “pre-qualified” for a
loan was a negligent misrepresentation, the Court will dismiss
Count Three.
E. A reasonable jury could find that Defendant violated the
New Jersey Consumer Fraud Act when it failed to properly
evaluate Plaintiffs for a loan modification.
The Consumer Fraud Act (“NJCFA”), N.J. Stat. Ann. § 56:8–2,
is designed to address “sharp practices and dealings in the
marketing of merchandise and real estate whereby the consumer
could be victimized by being lured into a purchase through
fraudulent, deceptive or other similar kind of selling or
25

advertising practices.” Daaleman v. Elizabethtown Gas Co., 390
A.2d 566, 569 (N.J. 1978). A claim under the NJCFA requires the
plaintiff to establish (1) that the defendant engaged in an
unlawful practice; (2) ascertainable loss; and (3) a causal
relationship between the unlawful conduct and the ascertainable
loss. See D’Argenzio v. Bank of Am. Corp., 877 F. Supp. 2d 202,
208 (D.N.J. 2012); Gonzalez v. Wilshire Credit Corp., 207 N.J.
557, 576 (2011) (quoting Lee v. Carter-Reed Co., 203 N.J. 296,
521 (2010)). The “prime ingredient” of all types of consumer
fraud is the capacity to mislead. Cox v. Sears Roebuck & Co.,
647 A.2d 454, 462 (N.J. 1994); Fenwick v. Kay Am. Jeep, Inc.,
371 A.2d 13, 16 (N.J. 1977). The Act is “remedial legislation
which should be construed liberally.” Int’l Union of Operating
Eng’rs Local No. 68 Welfare Fund v. Merck & Co., 929 A.2d 1076,
1079 n.1 (N.J. 2007).
An “unlawful practice” is defined under New Jersey statute
as
The act, use or employment by any person of any
unconscionable commercial practice, deception, fraud,
false pretense, false promise, misrepresentation, or the
knowing, concealment, suppression, or omission of any
material fact with intent that others rely upon such
concealment, suppression or omission . . . .
N.J.S.A. 56:8-2. Unlawful practices fall into three general
categories: (1) an affirmative misrepresentation, “even if
unaccompanied by knowledge of its falsity or an intention to
26

deceive”; (2) an omission or failure to disclose a material
fact, if accompanied by knowledge and intent; and (3) and
violations of specific regulations under the NJCFA, which are
reviewed under strict liability. See Cox, 647 A.2d at 462;
DepoLink Court Reporting & Litig. Support Servs. v. Rochman, 64
A.3d 579, 587 (N.J. Super. Ct. App. Div. 2013).
There is sufficient evidence from which a reasonable jury
could conclude that Defendant engaged in an affirmative
misrepresentation. Despite assuring Plaintiffs that it would
have a decision within six to twelve weeks about a loan
modification under a more favorable interest rate, and despite
accepting payment from Plaintiffs for that loan modification,
Defendant never properly evaluated Plaintiffs for a new loan
under the terms it had specified. Plaintiffs called Defendant
numerous times and each time were told that the evaluation was
proceeding, even though Defendant never requested any documents
from Plaintiffs regarding their income. Although Defendant
claims that it conducted an assessment and Plaintiffs failed to
qualify, there is no documentary evidence showing that such an
evaluation took place, or that the outcome was communicated to
Plaintiffs. Defendant’s claim is also contradicted by
Plaintiffs’ testimony that they were still waiting for a
decision on the loan modification when Defendant initiated
foreclosure. Defendant never returned Plaintiffs’ initial
27

payment, which, under their offer letter, they were required to
do if they failed to enter into a new loan agreement.
Under these facts, a reasonable jury could conclude that
Defendant offered to evaluate Plaintiffs for a loan modification
within twelve weeks; that this statement induced Plaintiffs to
submit payment; and that Defendant failed to properly assess
Plaintiffs as they said they would do. Defendant could
reasonably be found to have engaged in misrepresentation under
the NJCFA. See, e.g., DepoLink, 64 A.3d at 587 (noting that
affirmative misrepresentations need not be accompanied by
knowledge of its falsity or an intention to deceive); Monogram
Credit Card Bank of Ga. v. Tennesen, 914 A.2d 847, 853 (N.J.
Super. Ct. App. Div. 2007).
As there is also evidence that Plaintiffs incurred costs at
least in the amount of $2,415.00 as a direct result of
Defendant’s conduct, Plaintiffs have presented sufficient
evidence to overcome summary judgment on a NJCFA claim based on
Defendant’s failure to properly evaluate Plaintiffs for a loan
modification. However, as the evidence does not show that
Defendant made any guarantee to Plaintiffs about a getting a
lower-interest-rate loan, Plaintiffs do not have such a claim
under the NJCFA on those grounds.
F. Plaintiffs’ claim for slander of credit must be
dismissed.
28

Plaintiffs’ claim for slander of credit must likewise be
dismissed. A slander of credit claim is “a variation of a
defamation claim.” Cosmas v. Am. Exp. Centurion Bank, 757 F.
Supp. 2d 489, 494 (D.N.J. 2010) (citing Biederman v. Mitsubishi
Motors Credit of Am., Inc., 753 A.2d 1251, 1256 (N.J. Super. Ct.
Law Div. 2000)). Plaintiffs’ slander of credit claim appears to
be based on the theory that the decline in Plaintiffs’ credit
rating was caused by Defendant’s alleged instruction to
Plaintiffs to stop making payments on their mortgage. There is
no real dispute that Plaintiffs stopped paying their mortgage,
and that the failure led to Defendant’s foreclosure action,
which in turn lowered Plaintiffs’ credit score. Plaintiffs
argue, however, that Defendant should be held liable because its
wrongful actions caused Plaintiffs to stop their mortgage
payments in the first place.
As the Third Circuit has noted, a plaintiff alleging
slander of credit under New Jersey law must show “the
publication, or communication to a third person, of false
statements concerning the plaintiff, his property, or his
business.” F.D.I.C. v. Bathgate, 27 F.3d 850, 871 (3d Cir.
1994). An essential element of slander of credit claims under
New Jersey law is the falsity of the statements communicated to
a credit reporting agency. See, e.g., Biederman, 753 A.2d at
1256 (equating slander of credit claim to defamation claim and
29

stating that plaintiff must show that the statement made by
defendant was false); see also Altoona Clay Prods., Inc. v. Dun
& Bradstreet, Inc., 367 F.2d 625, 629 (3d Cir. 1966); Henry V.
Vaccaro Const. Co. v A.J. DePace, Inc., 349 A.2d 570, 572 (N.J.
Super. Ct. Law Div. 1975).
Bathgate is instructive in this case. There, the plaintiff
filed a complaint to collect on the defendants’ outstanding
debt, and the defendant raised a number of counterclaims,
including slander of credit. The Third Circuit affirmed the
district court’s dismissal of the slander of credit claim
because the statement that defendants were in default was
“accurate” and not false. In so holding, the Court observed that
it did not matter that the defendants had a defense to their
failure to pay, because “the existence of defenses to an action
predicated on defaults merely excuses a defendant’s failure to
make a payment, but the defenses do not constitute payment.” 27
F.3d at 871. Since defenses to default did not change the fact
that the defendants were in default, the court held that the
slander of credit claim was not actionable.
Similarly, in the present case, there is no genuine issue
of material fact regarding whether Plaintiffs failed to make
their mortgage payments or whether that failure resulted in
foreclosure. Plaintiffs argue only that the failure was due to
Defendant’s wrongful conduct inducing Plaintiffs to stop making
30

their mortgage payments, but that is irrelevant to whether the
information conveyed by Defendant was true. As there is no
evidence that Defendant communicated any false statements
regarding Plaintiffs’ failure to pay their mortgage payments,
the Court will grant summary judgment on the slander of credit
claim and dismiss Count VI.8
G. Plaintiffs’ claim for promissory estoppel must be
dismissed.
Plaintiffs additionally urge the Court to allow them to
recover damages under the doctrine of promissory estoppel.
Several conditions must be met in order for the doctrine of
promissory estoppel to apply: The plaintiff must show that there
was (1) a clear and definite promise (2) made with the
expectation that the promisee will rely on it; (3) reasonable
reliance; and (4) definite and substantial detriment. DeLuca v.
CitiMortgage, 543 Fed. App’x 194, 197 n.4 (3d Cir. 2013)
(quoting Toll Bros., Inc. v. Bd. of Chosen Freeholders, 944 A.2d

8

The Court notes that New Jersey law requires that “[e]very
action at law for libel or slander [] be commenced within 1 year
next after the publication of the alleged libel or slander.”
N.J.S.A. 2A:14-3. As Plaintiffs’ claim is based upon Defendant’s
improper conduct in 2009, it is likely barred by the statute of
limitations. However, because Defendant did not raise this in a
responsive pleading as an affirmative defense as required by
Federal Rule of Civil Procedure 8(c)(1), and does not now raise
it at summary judgment, the Court will deem the limitations
defense waived. See Pondexter v. Dep’t of Hous. and Urban Dev.,
324 Fed. App’x 169, 171 (3d Cir. 2009); Chainey v. Street, 523
F. 3d 200, 209 (3d Cir. 2008).
31

1, 19 (N.J. 2008)).
Plaintiffs’ sole argument is that Defendant promised to
“provide a new loan to [Plaintiffs] for which they ‘prequalified.’” But as the Court has already explained above, a
reasonable jury could not infer from the evidence that Defendant
made a clear and definite promise to Plaintiffs that they would
receive a loan modification. Aside from the letter offer, which
stated clearly that the letter was “not a guarantee or approval
of the loan modification,” Lawrence Sarlo’s own testimony
indicated that he believed a decision had never been made on
whether he and his wife would receive a loan modification.
Accordingly, the Court will grant summary judgment in
Defendant’s favor and dismiss Count Seven of Plaintiffs’
Complaint.
H. Plaintiffs’ claim for intentional infliction of
emotional distress must be dismissed.
Plaintiffs’ claim of intentional infliction of emotional
distress will be dismissed. Under New Jersey law, a claim of
intentional infliction of emotional distress requires a
plaintiff to establish intentional and outrageous conduct by the
defendant, proximate cause, and distress that is severe. See
Taylor v. Metzger, 706 A.2d 685, 694 (N.J. 1998); Buckley v.
Trenton Sav. Fund Soc’y, 544 A.2d 857, 863 (N.J. 1988). Severe
emotional distress refers to any type of severe and disabling
32

emotional or mental condition which may be generally recognized
and diagnosed by professionals trained to do so. Taylor, 706
A.2d at 685. In order to prove severe emotional distress, the
evidence must show that the distress was “so severe that no
reasonable [person] could be expected to endure it.” Buckley,
544 A.2d at 863 (internal quotations and citation omitted). In
other words, it is not enough to establish that a party is
acutely upset by reason of the incident; a plaintiff must show
that the claimed emotional distress was sufficiently substantial
to result in physical illness or serious psychological sequelae.
See Turner v. Wong, 832 A.2d 340, 348 (N.J. Super. Ct. App. Div.
2003); Lingar v. Live-In-Companions, Inc., 692 A.2d 61, 67 (N.J.
Super. Ct. App. Div. 1997). The severity of the claimed
emotional distress involves questions of both law and fact. The
court therefore decides in the first instance whether as a
matter of law severe emotional distress can be found, and the
jury then decides whether it has in fact been proved. Buckley,
544 A.2d at 864.
Plaintiff Lawrence Sarlo testified to mental anguish by
stating that he and his wife lost many nights of sleep over the
incident and that the phone call was “the worst phone call of my
life.” The loss of sleep and increased anxiety, however, is
insufficient as a matter of New Jersey law to establish mental
distress so severe that no reasonable person could be expected
33

to endure it. See, e.g., Buckley, 544 A.2d at at 864-65 (noting
that mere allegations of “aggravation, embarrassment, an
unspecified number of headaches, and loss of sleep” were
insufficient to establish severe emotional distress); Harris v.
Middlesex Cty. Coll., 801 A.2d 397, 406-07 (N.J. Super. Ct. App.
Div. 2002) (no evidence of severe emotional distress even though
plaintiff was unable to concentrate, cried excessively, and was
physically unable to work on doctorate for at least a year
because there was no evidence that the distress interfered with
day-to-day activities, and no evidence that plaintiff sought
counseling or treatment); Lascurain v. City of Newark, 793 A.2d
731, 748 (N.J. Super. Ct. App. Div. 2002) (declining to find
severe emotional distress where plaintiff claimed that she
became nauseous and upset, was depressed, had nightmares, and no
longer enjoyed her daily activities because, despite physician’s
diagnosis of depression, there had been no dramatic impact on
her everyday activities or her ability to function and she had
not sought regular psychiatric counseling); Aly v. Garcia, 754
A.2d 1232, 1237 (N.J. Super. Ct. App. Div. 2000) (finding no
severe emotional distress as a matter of law where plaintiffs
did not seek medical treatment or counseling and there was no
evidence of physical illness). Sarlo admitted that neither he
nor his wife sought medical assistance for their emotional
distress, and there is no evidence to suggest that they sought
34

counseling of any kind. Nor is there any evidence that
Plaintiffs’ mental distress caused physical illness or the
development of a disabling mental condition.
Because the evidence is insufficient to establish that
Plaintiffs suffered severe emotional distress, the Court will
grant summary judgment and dismiss Count Nine.
IV. CONCLUSION
For the foregoing reasons, the Court will deny Defendant’s
motion for summary judgment with respect to the claim of breach
of contract (Count One) and violation of the New Jersey Consumer
Fraud Act (Count Four), because there is a genuine issue of
material fact whether Defendant failed to properly evaluate
Plaintiffs for a loan modification. Defendant’s motion for
summary judgment will be granted with respect to all other
claims. The accompanying Order will be entered.

March 23, 2015
Date

s/ Jerome B. Simandle
JEROME B. SIMANDLE
Chief U.S. District Judge

35