Woods v. Wells Fargo Bank, NA

Filing 30

ORDER: Granting in Part and Denying in Part Motion for Summary Judgment 16 .Plaintiff's RESPA claims fail as a matter of law. Plaintiff's First Claim for Relief, Counts I and II, is dismissed. Signed on 1/28/14 by Chief Judge Ann L. Aiken. (ljb)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON

DARLENE WOODS,
Plaintiff,

Civ. No.

6:13-00457-AA

OPINION AND ORDER

v.
WELLS FARGO BANK, N.A.,
Defendant.
Tamara Powell
Albertazzi Law Firm
44 NW Irving
Bend, OR 97701
Attorney for Plaintiff
Robert J. Bocko
Daniel J. Park
Keesal, Young, & Logan
1301 Fifth Avenue, Suite 3300
Seattle, Washington 98101
Attorneys for Defendant
AIKEN, Chief Judge:
Plaintiff Darlene Woods filed suit against Wells Fargo Bank,
1

OPINION AND ORDER

N .A.

("Wells

Fargo"),

alleging

Settlement Procedures Act
breach of contract.

violations

(RESPA),

of

12 U.S.C.

Plaintiff seeks damages,

the

Real

Estate

2601 et seq., and

§

declaratory relief,

and attorney fees. Defendant moves for summary judgment pursuant to
Fed. R. Civ. P. 56 on all of plaintiff's claims, arguing that RESPA
does not apply to plaintiff's loan and that plaintiff's RESPA and
breach of

contract

claims

fail

as

a

matter

of

law.

Plaintiff

opposes defendant's motion.
Defendant's motion

is

granted

as

to

the

RESPA claims

and

denied as to the breach of contract claims.
I. BACKGROUND
In 2 00 6,

plaintiff purchased property

(the

"property")

in

Bend, Oregon. Woods Dep. 47:4-6 (attached as Ex. A to Park Decl.).
Plaintiff purchased the property for

the

use of House of Hope

Ministries ("HOHM"), a nonprofit organization, Woods Dep. 47:13-17,
and has never resided at the property. Id. at 61:5-14.
On

March

28,

refinance loan
Bank,

2007,

plaintiff

obtained

an

adjustable-rate

(the "loan")

for the property from World Savings

F.S.B. Woods Dep. Ex.

5 at 72-77. After plaintiff obtained

the loan, World Savings Bank, F.S.B. changed its name to Wachovia
Mortgage,
Mortgage

F. S. B.

Dolan Decl.

converted to

Wells

err

4.

Fargo

On November 1, . 2 0 0 9,
Bank

Southwest,

Wachovia

N. A.,

which

immediately merged into Wells Fargo. Dolan Decl. err 5. Accordingly,
defendant

2

is

the

successor

OPINION AND ORDER

to

World

Savings

with

respect

to

plaintiff's loan. Park Decl. Ex. Cat 8:9-18.
On October 21,

2010,

plaintiff filed for bankruptcy in the

United States Bankruptcy Court for the District of Oregon.
Decl. Ex. J.

Park

In August 2011, plaintiff and defendant agreed to a

stipulation (the "stipulation"), which modified some terms of the
loan. Woods Compl.

Ex. A.

The stipulation was incorporated into

plaintiff's Bankruptcy Plan. Park Decl. Ex. L. On August 29, 2011,
the

Bankruptcy

Court

issued

an

order

confirming

plaintiffs'

Bankruptcy Plan, including the stipulation. Id.
Under the stipulation, plaintiff was required to make monthly
principal and interest payments of $1533.03, beginning on September
1,

2011.

Woods

Compl.

Ex.

A at

3:10-13.

The

stipulation

also

required plaintiff to make monthly escrow payments for advances
paid by defendant on property taxes and hazard insurance.

Id. at

3:14-16. Plaintiff owed $2645.82 in taxes on the property for the
2011-2012 tax year ending on June 30, 2012. Woods Dep. Ex. 12 at
113. On October 26,

2011,

defendant paid the property taxes and

charged the amount to escrow. Id. at 115.
Defendant received plaintiff's first post-stipulation payment
on October 5, 2011 for $1533.03. Dolan Decl.

~

11. Defendant claims

that this payment was late and insufficient, as the first payment
under the stipulation was due on September 1, 2011 in the amount of
$1986.33, including the escrow payment. Id.
October

3

5,

2011

payment,

OPINION AND ORDER

plaintiff made

at~

11

10, Following the

additional monthly

at~

payments, each for $1533.03. Id.

11. However, defendant claims

that escrow payments were due for each month of the 2011-2012 tax
year,
paid

ending on June 1,
by

defendant.

As

2012,
a

to account for the property taxes

result,

defendant

deemed

plaintiff's

payments insufficient, and applied a portion of each payment to the
payment

for

the

previous

month.

Id.

at

~

12-13.

This

caused

plaintiff's unpaid balance to increase each month after September
2011. Id. at
payments.

~

14. Defendant notified plaintiff of these past due

Woods

Compl.

11.

However,

defendant

did

not

provide

plaintiff's attorney with notice of plaintiff's defaults. Hemphill
Decl.

8.

~

Plaintiff wrote a letter dated November 14, 2011 to defendant,
stating that the correct monthly payment for her loan was set at
$1533.03

and

requesting

that

defendant

correct

her

account

to

reflect this amount. Woods Dep. Ex. 15 at 119. Plaintiff's attorney
sent defendant a second letter dated March 19,

2012,

requesting

explanations and corrective actions by defendant with respect to
the loan. Woods Dep. Ex. 16 at
letter

dated

June

8,

2012,

Defendant responded in a

120~123.

providing

some

of

the

requested

explanations and informing plaintiff's attorney that none of the
requested corrective actions would be taken. Woods Dep. Ex. 17 at
Plaintiff's

124-126.
defendant,

dated

attorney

November

28,

then
2012,

sent

another

again

letter

requesting

corrective actions be taken. Woods Dep. Ex. 18 at 127-128.

4

OPINION AND ORDER

to
that

On

September

6,

2012,

plaintiff

obtained

a

property

tax

exemption for the 2012-2013 tax year on the basis that the property
was used for charitable purposes. Woods Dep. Ex.
exception did not

cover the

2011-2012

tax

19 at 129. The

year.

Id.

Defendant

claims that it did not charge escrow for taxes after October 2012
due to the exception.

Def.'s Mem. in Supp. of Mot.

for Summ. J.

14.
In

a

letter

dated

January

10,

2013,

defendant

informed

plaintiff's attorney that plaintiff's loan was "in foreclosure."
Woods Dep. Ex. 14 at 115. On March 18, 2013, plaintiff filed suit.
II. STANDARD
Summary judgment

is appropriate

"if the movant

shows 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).
The substantive law on an issue determines the materiality of a
fact. T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809
F.2d 626, 630 (9th Cir. 1987). A factual dispute is genuine if the
evidence is such that a reasonable jury could determine the issue
in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc.,
477

u.s. 242, 242 (1986).
The moving party has the burden of establishing the absence of

a genuine issue of material fact.
U.S. 317, 323

(1986).

Celotex Corp.

v.

Catrett,

477

If the moving party meets this burden, the

nonmoving party must go beyond the pleadings and identify facts

5

OPINION AND ORDER

which show a genuine issue for trial. Id. at 324.
Special

niles

judgment motions:

of

construction apply to evaluating summary

(1) all reasonable doubts as to the existence of

genuine issues of material
moving

party;

and

(2)

all

fact

should be resolved against the

inferences

to

be

drawn

from

the

underlying facts must be viewed in the light most favorable to the
nonmoving party.

T.W. Elec., 809 F.2d at 630.
III. DISCUSSION

A. RESPA Claims
Plaintiff's first claim alleges that defendant violated RESPA
by failing to adequately respond to plaintiff's qualified written
requests
loan,

("QWRs")

for information and corrective actions on her

see 12 U.S.C.

2605(e),

§

and that defendant engaged in a

pattern or practice of noncompliance with RESPA. See 12 U.S.C. §
2605 (f) (1) (a). Defendant argues that both counts fail as a matter
of law. I agree.
RESPA requires the servicer of a federally regulated mortgage
loan to provide borrowers with a timely written response to a QWR.
12 U.S.C.

§

2605. A QWR is a written correspondence that includes

"the name and account of the borrower" and "a statement of the
reasons .

that the account is in error or provides sufficient

detail to the servicer regarding other information sought by the
borrower." 12 U.S.C.

§

2605 (e) (1) (B).

If the servicer fails

to

adequately respond to a QWR, RESPA entitles the borrower to recover

6

OPINION AND ORDER

actual

damages

and,

if

there

is

a

"pattern

or

practice

noncompliance," statutory damages of up to $2, 000.

12 U.S. C.

of
§

2605 (f).
Defendant moves for summary judgment on the grounds that RESPA
does not apply to plaintiff's loan because plaintiff obtained the
property for

a

"business purpose." See 12 U.S.C.

§

2606(a) (1).

Plaintiff argues that because the property was used for a nonprofit
corporation, the RESPA business purpose exception does not apply.
RESPA

"does

not

apply

extensions of credit .

to

credit

transactions

involving

primarily for business, commercial, or

agricultural purposes." 12 U.S.C.

§

2606(a). RESPA's implementing

regulations define a "business purpose loan" as:
An extension of credit primarily for a business,
commercial, or agricultural purpose, as defined by
Regulation Z, 12 C.F.R. 226.3 (a) (1). Persons may rely on
Regulation Z in determining whether the exemption
applies.
24 C.F.R.

§

3500.5(b) (2). Regulation Z, 12 C.F.R.

§

226.1 et seq.,

was issued by the Federal Reserve Board "to implement the federal
Truth in Lending Act" ("TILA"). 12 C.F.R.

§

226.1. The referenced

provision of Regulation Z simply states that the regulation does
not apply to "[a]n extension of credit primarily for a business,
commercial or agricultural purpose," 12 C.F.R.
the Official
guidance.

Staff Commentary on Regulation

See 12 C.F.R.

Pt.

226,

Supp.

I.

§

226.3; however,

Z provides

further

The Ninth Circuit has

held that these official staff interpretations of Regulation Z are

7

OPINION AND ORDER

controlling in determining whether a loan falls under the RESPA
"business purpose" exception. Johnson v. Wells Fargo Home Mortgage,
Inc., 635 F.3d 401, 417 (9th Cir. 2011); see also Ford Motor Credit
Co. v. Milhollin, 444 U.S. 555, 565
staff

opinions

interpreting

(1980)

TILA

(Federal Reserve Board

and

its

regulations

are

controlling "[u]nless demonstrably irrational").
Comment 3 (a) (4) of the Official Staff Commentary on Regulation
Z provides:

" [ c] redi t

extended to acquire,

improve,

or maintain

rental property (regardless of the number of housing units) that is
not

owner-occupied is

deemed to

be

for

business

purposes."

12

C.F.R. Pt. 226, Supp. I, Cmt. 3(a) (4). Plaintiff does not dispute
that the property is a non-owner-occupied rental property. Mem. in
Supp. of Pl.'s Resp. to Def.'s Mot.

for Summ. J. 11-13. Instead,

plaintiff argues that because the loan was a refinance loan on a
property she already owned, the purpose of obtaining the credit was
not to "acquire,
3 (a) (4)

improve,

or maintain" the property, and Comment

does not apply. However,

as defendant notes, a refinance

loan used to pay off existing debt may be

characterized as an

acquisition loan.

Fin.,

See Bergman v.

Fid.

Nat.

Inc.,

2012 WL

6013040 (C.D. Cal. Dec. 3, 2012). Furthermore, the refinance loan
allowed plaintiff to maintain the property.
Plaintiff also argues that the "business purpose" exception
does not apply to loans obtained for charitable purposes. However,
plaintiff cites no cases

8

OPINION AND ORDER

in which a

court has

held that RESPA

applies to a non-owner occupied rental property. Plaintiff leased
the property to HOHM and collected monthly rent. Woods Dep. 59:520.

Although plaintiff did not profit from the lease,

property

meets

the

Official

Staff

Commentary

id.,

the

definition

of

"non-owner-occupied rental property." 12 C.F.R. Pt. 226, Supp. I,
Cmt. 3 (a) ( 4) • Therefore, plaintiff's refinance loan was a "business
purpose loan" exempt from RESPA,

and her RESPA claims fail as a

matter of law. 1
B. Breach of Contract Claims
Plaintiff's second claim alleges breach of contract on four
separate counts. Defendant argues that the contract claims fail as
a matter of law because plaintiff materially breached the parties'
agreement by failing to make full or timely monthly payments.

I

reject this argument.
Under Oregon law,
very

substance

of

the

"[a] breach is material if it goes to the
contract

and

defeats

the

object

parties entering into the contract." Bisio v. Madenwald,

of

the

33 Or.

App. 325, 331 (1978). "[I]f a written contract between the parties
expressly allows for a particular remedy by one of the parties, in
the

face

of

a

specified

breach,

the

parties'

objectively

'reasonable expectations' under the contract include the invocation

1

Because RESPA does not apply to the loan, it is
unnecessary to determine whether plaintiff's three letters were
QWRs and whether defendant adequately responded to those
inquiries.
9

OPINION AND ORDER

of

that

remedy

in

the

face

of

that

breach."

Uptown

Heights

Associates Ltd. P'ship v. Seafirst Corp., 320 Or. 638, 645 ( 1995).
Here,
remedies

the
in

plaintiff.

stipulation

the

event

First,

specifically sets

of

a

late

defendant

must

or

forth

insufficient

provide

written

defendant's
payment
notice

by
via

certified mail to plaintiff and her attorney. Woods Compl. Ex. A at
3:19-28.

Plaintiff is charged a fee of $100.00 for each default

letter. Id. at 4:5-7. Plaintiff then has 30 days from the date of
notice to cure the default.
default

within

proceedings.

30

Id.

at

days,

Id.

If plaintiff does not cure the

defendant

3:22-28.

may

initiate

foreclosure

If the court accepted defendant's

argument that defendant was absolved of its obligation to provide
notice upon plaintiff's first late payment, these remedies would be
extraneous. This was clearly not the parties'
the stipulation.

Therefore,

full

monthly

or

timely

intent in drafting

plaintiff's alleged failure to make

payments

did

not

excuse

defendant's

obligations under the agreement.
Defendant

next

claims

that

even

if

plaintiff

was

not

in

material breach, plaintiff's four counts of breach of contract fail
as a matter of law.

I find that plaintiff's claims raise genuine

issues of material fact, and accordingly deny summary judgment.
1. Failure to Apply Funds
Plaintiff

alleges

in

Count

I

that

defendant

breached the

stipulation by failing to apply funds paid by plaintiff to the loan

10

OPINION AND ORDER

account,

resulting

in

late

fees.

Defendant

acknowledges

"[p]laintiff's payments were temporarily put in
Wells Fargo could determine how to apply them."

'suspense'

that
until

Def.'s Mem.

in

Supp. of Mot. for Summ. J. 31. However, the Deed of Trust requires
defendant to apply all of plaintiff's payments to fees,

escrow,

interest, and principal due on the loan. Woods Dep. Ex. 6 at 80-81
~

3. The loan agreement does not address when defendant may place

funds in "suspense," id., and the stipulation did not modify this
provision.

Woods

Compl.

Ex.

A at

3:19-28.

Therefore,

plaintiff

presents a genuine issue of material fact as to whether defendant's
placement of her payments in "suspense" violated the terms of the
loan agreement.
2. Failure to Supply Notice of Default
In Count

II,

plaintiff argues

that

defendant breached the

stipulation by failing to provide notice of default to plaintiff's
attorney. The stipulation requires that "in the event of any future
default" by plaintiff,

"[defendant]

shall provide written notice

via certified mail to [plaintiff and her attorney]." Id. Defendant
sent notice of default to plaintiff several times. Woods Compl. 11.
However, defendant failed to provide notice to plaintiff's attorney
when plaintiff allegedly defaulted on the terms of the stipulation
by making late and insufficient payments. Def.'s Mem. in Supp. of
Mot. for Summ. J. 31-32.
Defendant does not dispute that it did not provide notice to

11

OPINION AND ORDER

plaintiff's attorney. Id. Instead, defendant claims that it was not
yet required by the stipulation to provide notice because "it had
not

formally

Property."

Id.

initiated

foreclosure

However,

the

proceedings

stipulation

against

requires

the

defendant

to

provide notice to plaintiff and her attorney "[i]n the event of any
future

default," Woods

including

a

late

Compl.

payment

or

Ex.
a

A at

failure

3:19
to

(emphasis

include

added),

escrow

in a

monthly payment. See id. at 3:10-16. Defendant failed to meet this
requirement. Accordingly, summary judgment on Count II is denied.
3. Breach of Good Faith
Count III alleges that defendant breached the covenant of good
faith and fair dealing. Every contract contains an implied duty of
good faith.

See, e.g., Uptown Heights,

320 Or. at 645. That duty

"is to be applied in a manner that will effectuate the reasonable
contractual expectations of the parties." Pac.

First Bank v. New

Morgan Park Corp., 319 Or. 342, 360 (1994). "Whether a bank acts in
good faith is generally a question for the jury, unless only one
inference from the evidence is possible."

First Interstate Bank of

Oregon, N.A. v. Wilkerson, 128 Or. App. 328, 334
omitted)

( citations

omitted) .

In pleading Count

(1994)

(emphasis

III,

plaintiff

merely reasserts her allegations from Counts I and II, and does not
provide any additional facts to support the argument that defendant
violated good faith.
could

12

find

that

However,

defendant

OPINION AND ORDER

as noted above,
failed

to

act

in

a reasonable jury
accordance

with

plaintiff's reasonable expectations as to the loan agreement. If a
jury

finds

that

defendant

breached

one

or

more

terms

of

the

parties' agreement, it might also find that defendant breached the
covenant of good faith.

Therefore,

summary judgment is denied on

Count III.
4. Breach of Agreement to Comply With RESPA
Finally,
contractually
agreement.

in

Count

agreed

Parties

IV,

to
can

plaintiff

comply

with

claims

RESPA

incorporate

federal

that

and

defendant

breached

statutes

that

into

a

contract. See Craddock Int'l Inc. v. W.K.P. Wilson & Son, Inc., 116
F. 3d 10 95

(5th Cir.

19 97)

(" [p] arties

to

contract who

are

not

subject to statute may choose to use parts of statute to define
their

relationship

bear");

without

Guerini Stone Co.

U.S. 264, 277 (1916)

v.

bringing
P.

J.

full

force

agreement

statute

Carlin Construction Co.,

to
240

("a reference by the contracting parties to an

extraneous writing for a particular purpose makes
their

of

only

for

the

purpose

it a part of

specified");

see

also

Williston on Contracts§ 30:19 (4th ed.).
The Deed of Trust specifically mentions RESPA twice:
Lender may, at any time, collect and hold funds in an amount
not to exceed the maximum amount a lender for a federally
related mortgage loan may require for an escrow account under
the federal Real Estate Settlement Procedures Act of 1974.

***
If the amount of the Funds held by Lender at any time is not
sufficient to pay the Escrow items when due, Lender may so
notify me in writing, and, in such case I shall pay to Lender
13

OPINION AND ORDER

the amount necessary to make up the deficiency or shortage. I
shall make up the deficiency or shortage in accordance with
the requirements of the Lender, at its sole discretion, in the
manner and times prescribed by RESPA.
Dep.

Woods

Ex.

6 at

80

CJI

2 (B) . 2 In these paragraphs,

defendant

agreed to adhere to the escrow limitations set forth in RESPA, 12
U.S.C. § 2609, and the parties agreed that plaintiff would correct
deficiencies in accordance with RESPA.
The

stipulation

supersedes

the

3

Deed's

second

reference

to

RESPA, providing new notification and timing requirements to occur
in the event of any default by plaintiff. Woods Compl.

Ex. A at

3:19-28.

the

However,

the

stipulation

does

not

address

Deed

provision requiring defendant to adhere to RESPA's escrow account
limitations.

The stipulation states that "[e] xcept as otherwise

provided herein, all remaining terms of the Note and Deed of Trust
shall govern the

treatment

of Creditor's

Secured Claim." Woods

Compl. Ex. A at 3:17-18. Therefore, the parties' contract includes
2

To the extent that plaintiff argues that these references
render RESPA applicable to her loan in its entirety, I reject
that argument. The Deed of Trust makes clear that only the
referenced provisions of RESPA apply to her loan.
3

Defendant argues that the sections of the Deed referring
to RESPA are not part of the parties' contract. Def.'s Reply in
Supp. of Mot. for Surnrn. J. 12-13. However, the section of the
Deed that mentions RESPA is entitled "COVENANTS" and states at
the top: "I promise and I agree with Lender as follows." Woods
Dep. Ex. 6. The last page of the form states: "BY SIGNING BELOW,
I accept and agree to the promises and agreements contained in
the Security Instrument". Id. at 88. Plaintiff signed and
notarized the form. Id. Based on the language of the form, it is
apparent that CJI 2(B) is a part of the loan agreement between
plaintiff and defendant.
14

OPINION AND ORDER

an agreement by defendant to comply with

§

2609 for purposes of

escrow collections and withholdings.
In

imposing

limits

on

escrow

collections,

§

2609

also

provides: "in the event the lender determines there will be or is
a

deficiency[,]

he

shall

additional monthly deposits

not

be

address whether

it

from

requiring

in such escrow account to avoid or

eliminate such deficiency." 12 U.S.C.
not

prohibited

§

2609(a) (2). Defendant does

satisfied the

contractually agreed-upon

RESPA provisions, and therefore fails to establish the absence of
a genuine issue of material fact. Accordingly, summary judgment on
Count IV is denied.
CONCLUSION
Plaintiff's RESPA claims fail as a matter of law.
defendants' motion for summary judgment

(doc.

16)

Therefore,

is GRANTED in

part, and plaintiff's First Claim for Relief, Counts I and II, is
DISMISSED. Defend~n~'t ~otion is otherwise DENIED.
Dated this

-~---~day

of January, 2014.

Ann Aiken
United States District Judge

15

OPINION AND ORDER