Kern et al v. Wells Fargo Bank, N.A.
Filing
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MEMORANDUM OPINION AND ORDER GRANTING 12 MOTION for Summary Judgment . (Signed by Judge Gray H Miller) Parties notified.(rkonieczny, 4)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
KIRK L. KERN AND JACQUELINE KERN,
Plaintiff,
v.
WELLS FARGO BANK, N.A.,
Defendant.
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CIVIL ACTION H-18-1355
MEMORANDUM OPINION AND ORDER
Pending before the court is defendant Wells Fargo Bank, N.A.’s (“Wells Fargo”) motion for
summary judgment. Dkt. 12. Also pending before the court are Wells Fargo’s objections to the
summary judgment evidence plaintiffs Kirk L. Kern and Jacqueline Kern (collectively, the “Kerns”)
submitted in response to Wells Fargo’s motion for summary judgment. Dkt. 21. After considering
the motions, responses, replies, and applicable law, the court is of the opinion that the motion for
summary judgment should be GRANTED and Wells Fargo’s objections should be OVERRULED
AS MOOT.
I. BACKGROUND
The Kerns had a mortgage loan with Wells Fargo. Dkt. 12-1 (Exh. A). The Kerns allege that
in October 2008, Wells Fargo employees told the Kerns to send half of their monthly payment
amount in order to qualify for a loan modification. Dkt. 1-2 at 10; Dkt. 14-1 at 2. From November
2008 to March 2008, the Kerns made their monthly payments on their mortgage but only sent half
the amount owed each month. Dkt. 12-5 (Exh. E). In April 2009, the parties entered into a
Temporary Modification Agreement. Dkt. 12-8 (Exh. H). The Temporary Modification Agreement
reduced the Kerns’ monthly payment until April 2010. Dkt. 1-2 at 5; Dkt. 12-9 (Exh. I). From May
2009 through April 2010, the Kerns made payments in accordance with the Temporary Modification
Agreement. Dkt. 12-5 (Exh. E).
After the Temporary Modification Agreement period ended, the Kerns made payments in
accordance with the original terms from May 2010 to April 2011. Id. Beginning in May 2011, the
Kerns made no payments to their mortgage loan. Id. In July 2011, Wells Fargo sent the Kerns a
letter regarding modifications to loans under the Home Affordable Modification Program
(“HAMP”). Dkt. 12-11 (Exh. 11). However, the Kerns continued to not make any payments on their
mortgage loan, and in August 2011 the Kerns defaulted on their mortgage. Dkt. 12-5 (Exh. E); Dkt.
12-10 (Exh. J).
The Kerns have now sued Wells Fargo for fraud. Dkt. 1-2. The Kerns allege that Wells
Fargo: (1) instructed the Kerns to default on the mortgage so that they would be eligible for HAMP
eligibility; (2) falsely informed the Kerns several times that Wells Fargo did not have the required
documentation for a HAMP application and had the Kerns re-submit their documentation numerous
times; (3) made misrepresentations regarding approval of a “temporary modification of their
mortgage with reduced ‘trial payments’ pursuant to” the HAMP program; and (4) omitted the fact
it was conducting inspections and charging for those inspections. Id. at 10–16.
Wells Fargo has moved for summary judgment on the Kerns’ fraud claim. Dkt. 12.
II. LEGAL STANDARD
A.
Summary Judgment
A court shall grant summary judgment when a “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). “[A] fact is genuinely in dispute only if a reasonable jury could return a verdict for
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the nonmoving party.” Fordoche, Inc. v. Texaco, Inc., 463 F.3d 388, 392 (5th Cir. 2006). The
moving party bears the initial burden of demonstrating the absence of a genuine issue of material
fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548 (1986). If the moving party meets
its burden, the burden shifts to the non-moving party to set forth specific facts showing a genuine
issue for trial. Fed. R. Civ. P. 56(e). The court must view the evidence in the light most favorable
to the non-movant and draw all justifiable inferences in favor of the non-movant.
Envtl.
Conservation Org. v. City of Dallas, 529 F.3d 519, 524 (5th Cir. 2008).
II. ANALYSIS
To prevail on a common law fraud claim, a plaintiff must prove: (1) that a material
representation was made; (2) the representation was false; (3) the representation was either known
to be false or asserted without knowledge of the truth when made; (4) the representation was
intended to be acted upon; (5) the representation was relied upon; and (6) the representation caused
injury. Allstate Ins. Co. v. Receivable Fin. Co., 501 F.3d 398, 406 (5th Cir. 2007) (quoting In re
FirstMerit Bank, N.A., 52 S.W.3d 749, 758 (Tex. 2001)). Wells Fargo challenges certain elements
for each of the Kerns’ fraud allegations.1 Dkt. 12 at 11–12.
1.
The Kern’s Allegation that Wells Fargo Induced the Kerns to Default
Wells Fargo argues that the Kerns did not rely on Wells Fargo’s representations. Dkt. 12 at
12. Wells Fargo argues that the summary judgment evidence proves that the Kerns defaulted on the
loan because they could no longer afford it, not because they relied on alleged misrepresentations
from Wells Fargo. Id.
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Wells Fargo also objects to certain evidence raised in the Kern’s response. Dkt .21.
However, even if the court did consider the evidence that was objected to, summary judgment would
still be appropriate.
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The Kerns argue that Wells Fargo instructed them to make reduced payments in order to be
eligible for a loan modification under HAMP. Dkt. 14 at 7. To prove reliance the Kerns point to
their own affidavits saying that Wells Fargo told the Kerns to stop making their regular mortgage
payments for the full amount. Dkt. 14 at 8. These representations allegedly occurred in 2008.
Dkt. 14-1 at 2. Additionally, the Kerns alleged that because of these alleged representations, the
Kerns believed they were required to be in default to be eligible for a modification under the HAMP
program. Dkt. 14 at 8.
Taking all inferences in favor of the non-movant, at most this testimony creates a genuine
issue of material fact as to whether Wells Fargo induced the to default in order to be eligible for the
Temporary Modification Agreement in 2009. The affidavits do not help prove that Wells Fargo
induced the Kerns to default in order to be eligible for a HAMP modification in 2011, which is what
is at issue in this case. Further, the Kerns only allege that Wells Fargo representatives instructed the
Kerns to only pay half the amount of their monthly payments in order to be eligible for a
modification. Dkt. 14-1 at 2; Dkt. 14-2 at 2. However, after the temporary modification period
ended, Plaintiffs made no payments to their mortgage loan. Dkt. 12-5 (Exh. E). Thus, the Kerns
defaulted because they made no payments, not because Wells Fargo instructed them to make half
their monthly payments. Accordingly, the court GRANTS summary judgment on this allegation.
2.
The Kerns’ Allegation that Wells Fargo Falsely Represented that the Kerns’
Application was Incomplete
The Kerns also allege that Wells Fargo made misrepresentations regarding their HAMP
application. Dkt. 1-2 at 11. According to the complaint, in July 2011, Wells Fargo provided the
Kerns with a HAMP application. Id. The Kerns allege that they promptly and properly returned the
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application to Wells Fargo. Id. However, the Kerns allege that Wells Fargo repeatedly told the
Kerns that they did not have the required documentation and that the Kerns needed to re-submit the
application. Id.
To support their position, the Kerns point to records of documents submitted and received
by Wells Fargo. Dkt. 14 at 8–9. However, the summary judgment evidence provided by the Kerns
does not support their allegation that they properly submitted the required documentation for a loan
modification under HAMP. The Kerns point to paragraph 7 of their affidavits concerning the
Temporary Modification Agreement in 2009. Dkt. 14 at 8; Dkt. 14-1 at 2. This evidence proves
only that the Kerns timely submitted the proper documentation regarding the Temporary
Modification Agreement in 2009. It does not prove that the Kerns timely submitted the required
documentation for the modification sought that is at issue in this case regarding their HAMP
Application in 2011.
Next, the Kerns point to evidence that they submitted HAMP documentation on January 30,
2012. Dkt. 14 at 9. However, on September 15, 2011, Wells Fargo sent Mr. Kern a letter that
requested documentation from the Kerns within 30 days to help determine if they were eligible for
a loan modification under HAMP. Dkt. 14-9. The Kerns’ own summary judgment evidence
demonstrates that Kerns did not submit the requested information by the October 2011 deadline.
Dkt. 12-12. The Kern’s own summary judgment evidence undermines their argument that they
promptly submitted all the required documentation required for a HAMP modification to Wells
Fargo.2 Accordingly, the court GRANTS summary judgment on this allegation.
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There is also evidence that the Kerns’ modification application was denied because their
“current income [was] unable to support a modified payment” at the time, not because Wells Fargo
lacked the proper documentation. Dkt. 12-2 at 53.
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3.
The Kerns’ Allegation that Wells Fargo Made Misrepresentations as to the
Temporary Modification and Their Trial Payments
Wells Fargo also challenges whether it falsely misrepresented that the Kerns were approved
for a Temporary Modification. Dkt. 12 at 13. Wells Fargo argues that it never misrepresented the
status of the Temporary Modification because the parties actually executed a Temporary
Modification in April 2009. Dkt. 12 at 13–14.3 The court agrees.
There is evidence that the parties engaged in a Temporary Modification Agreement in April
2009. The Modification Agreement provided that “[t]he Bank will reduce the interest rate on the
current outstanding balance for a period of 12 months (the ‘Modification Period’).” Dkt. 12-8
(Exh. H). Thus, the modification period under the Temporary Modification Agreement ended in
April of 2010. Dkt. 12-9 (Exh. I). The Kerns have not provided any evidence that Wells Fargo made
any misrepresentations regarding their approval for the Temporary Modification in 2009.
Accordingly, the court GRANTS summary judgment on this allegation.4
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The Kerns do not directly address Wells Fargo’s argument that they did not misrepresent
approval of a temporary modification. Instead, the Kerns repeat similar arguments that they
repeatedly submitted their modification application documents, stopped making regular mortgage
payments, and made trial payments because Wells Fargo employees instructed them to do so. Dkt. 14
at 9.
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The Kerns also argue that Wells Fargo made misrepresentations regarding the payments the
Kerns made under the modification period because Wells Fargo retained those payments for profit.
Dkt. 14 at 9. As evidence, the Kerns point to their affidavits which do not support this allegation.
Id. However, Wells Fargo provided evidence that the Kern’s payments during the modification
period were applied to the mortgage’s principal balance, not to an “unapplied account for profit.”
Dkt. 12-5. (Exh. E).
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4.
The Kerns’ Allegation that Wells Fargo Fraudulently Charged the Kerns Inspection
Fees
Finally, in the complaint, the Kerns alleged that Wells Fargo was “conducting unnecessary
and improper inspections on their home and charging their account inspection fees.” Dkt. 1-2 at 15.
According to the Kerns, Wells Fargo applied some of the trial payments to fraudulent inspection
fees. Id. However, in their response the Kerns assert for the first time that Wells Fargo charged
numerous inspection fees for inspections that actually never occurred. Dkt. 14 at 10. They also
argued that Wells Fargo applied a portion of the payments the Kerns made during the modification
period to the fraudulent inspection fees. Id. at 9. “A claim which is not raised in the complaint but,
rather, is raised only in response to a motion for summary judgment is not properly before the court.”
Cutrera v. Bd. of Sup'rs of Louisiana State Univ., 429 F.3d 108, 113 (5th Cir. 2005). The Kerns’
complaint alleged that inspections had actually occurred, however, in their response, the Kerns now
allege that the inspections never actually occurred. Thus, the claim that Wells Fargo charged the
Kerns for inspections that did not actually occur and applied a portion of the funds the Kerns paid
for “trial payments” is not properly before the court.
Even if the court could consider the Kerns’ allegation, this allegation fails. The Kerns have
not presented any summary judgment evidence that Wells Fargo improperly charged them inspection
fees. The Kerns also did not present any evidence that Wells Fargo did not credit their account when
they made payments during the modification period. The Kerns point to a fax where they complain
about a payment taken from their checking account that was not applied to their loan in 2006.
Dkt. 14 at 9; Dkt. 14-4. However, the alleged missing 2006 payment does not create a genuine issue
of material fact as to whether Wells Fargo applied the Kerns’ payments made during the
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modification period to fraudulent inspections. In fact, there is evidence that the Kern’s payments
during the modification period were applied to the mortgage’s principal balance, not inspection fees.
Dkt. 12-5. (Exh. E). Accordingly, the court GRANTS summary judgment on this allegation.
VI. CONCLUSION
For these reasons, Wells Fargo’s motion for summary judgment (Dkt. 12) is GRANTED
and Wells Fargo’s objections to the Kern’s summary judgment evidence (Dkt. 21) are
OVERRULED AS MOOT. Because the court is granting summary judgment, the Kerns’ request
for attorney’s fees (Dkt. 1 at 3) is DENIED.
Signed at Houston, Texas on June 28, 2019.
________________________________
Gray H. Miller
Senior United States District Judge
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