Dohner et al v. Wachovia Mortgage FSB et al
MEMORANDUM DECISION granting 15 Motion to Dismiss plaintiffs' complaint with prejudice. Signed by Judge David Sam on 9/13/11. (jmr)
THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH
DANIEL B. DOHNER,
MARY LYNN DOHNER
WACHOVIA MORTGAGE FSB,
a United States federal savings bank )
WELLS FARGO HOME MORTGAGE,
a division of Wells Fargo Bank, NA, )
a United States corporation
FIRST AMERICAN TITLE INSURANCE )
a Utah company
ETITLE INSURANCE AGENCY
a Utah company
Case No. 2:11-CV-00276-DS
The court has before it Defendants’ Motion to Dismiss Plaintiff’s Complaint pursuant to
Fed.R.Civ.P. 12(b)(6). While the court notes plaintiffs’ request for hearing, the court has
considered the briefing, the state of the law on the issues presented to the court, and DUCivR71(f) and finds that there is no justification for oral argument on the motion pending before the
court. The motion to dismiss will therefore be determined by the court on the basis of the written
memoranda of the parties.
On or about March 11, 2008, Plaintiffs obtained a loan from the original lender,
Wachovia, in order to refinance a home located at 1363 East Elk Glen Drive, Draper, Utah.
Wachovia loaned Plaintiffs $645,000.00. Plaintiffs executed a promissory note that required
repayment of the loan and a deed of trust encumbering the property and securing Plaintiff’s
obligations under the note. Subsequently, Plaintiffs defaulted on the loan by failing to make full
monthly payments. Plaintiffs filed their Complaint in this case on March 23, 2011, setting
forth three separate Causes of Action against Wachovia Mortgage, FSB, Wells Fargo Home
Mortgage, Wells Fargo Bank, N.A., and Mortgage Electronic Registration Systems, Inc. (the
“Wells Fargo Defendants”): (1) Breach of Duty of Good Faith and Fair Dealing, (2) Negligent
Misrepresentation, and (3) Violation of the Fair Credit Reporting Act. The Wells Fargo
Defendants filed their Motion to Dismiss pursuant to Rule 12(b)(6) of the Federal Rules of
Civil Procedure on May 27, 2011.
2. Standard of Review
When evaluating a motion to dismiss, the court accepts all factual allegations in the
complaint as true and draws all reasonable inferences in favor of the nonmoving party. See
Archuleta v. Wagner, 523 F.3d 1278, 1283 (10th Cir. 2008); Andersen v. Merrill Lynch Pierce
Fenner & Smith, Inc., 521 F.3d 1278, 1284 (10th Cir. 2008). A claim has facial plausibility when
the plaintiff pleads factual contents that allow the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged. Corder v. Lewis Palmer Sch. Dist. No. 38, 566
F.3d 1219, 1223-1224 (10th Cir. 2009).
3. Claim Against Wells Fargo Defendants for Breach of Duty of Good Faith and Fair
Plaintiffs first allege that the Wells Fargo defendants breached their duty of good faith
and fair dealing by inducing the Plaintiffs to become delinquent on their mortgage and then
failing to timely and adequately consider them for a loan modification. The implied
covenant of good faith and fair dealing inheres in every contract. See Eggett v. Wasatch
Energy Corp., 94 P.3d 193, 198. As distinguished from a contract’s express terms, the
covenant “is based on judicially recognized duties not found within the four corners of the
contract.” Christiansen v. Farmers Ins. Exch., 116 P.3d 259, 265 (Utah 2001) (citing Beck v.
Farmers Ins. Exch., 701 P.2d 795, 798 (Utah 1985)). “Under [the covenant], both parties to a
contract impliedly promise not to intentionally do anything to injure the other party’s right
to receive the benefits of the contract.” Eggett, 94 P.3d at 195. Furthermore, the “covenant .
. . should prevent either party from impeding the other’s performance of his obligations
[under the contract]; and . . . one party may not render it difficult or impossible for the
other to continue performance and then take advantage of the non-performance he has
caused.” Zion’s Props., Inc. v. Holt, 538 P.2d 1319, 1321 (Utah 1975) (footnote omitted); see
also Advanced Restoration, 126 P.3d 786, 792 (Utah Ct. App. 2005); PDQ Lube Ctr., Inc. v.
Huber, 949 P.2d 792, 798 (Utah Ct. App. 1997).
Plaintiffs allege that prior to defaulting on their loan, they requested a loan modification.
(Compl., ¶¶ 58-67.) Plaintiffs claim that when they attempted to request the loan modification
from Wachovia, they were informed that they must first be delinquent to request such a
modification. (Compl., ¶ 61.) Plaintiffs then allege that Wells Fargo defendants failed to timely
respond, a delay which caused the delinquency amount on the mortgage to increase to the
point where Plaintiffs were unable to cure the default.(Compl., ¶ 61.) These facts, as alleged,
do not indicate that the Wells Fargo Defendants either impeded the Dohners in performing their
obligations under the contract or rendered it impossible for the Dohners to perform. The parties
do not dispute that the Wells Fargo Defendants were under no duty to modify the loan agreement.
The Dohners elected to breach the contract unilaterally, hoping that Wells Fargo would modify
the loan. None of Plaintiffs’ allegations to indicate that Wells Fargo induced this default, but
simply that Wells Fargo explained that it would not consider Plaintiffs for a modification unless
they were in default. (Compl., ¶ 61.)
Plaintiffs rely on several cases to support their theory that the Wells Fargo defendants
acted in bad faith when they failed to modify the Dohner’s loan. Each of these cases is
distinguishable from the fact scenario at hand. Plaintiffs point to an exception to the Statute of
Frauds that provides “[i]f a party has changed his position by performing an oral modification so
that it would be inequitable to permit the other party to found a claim upon the original
agreement[,] . . . the modified agreement should be held valid.” Stanton v. Ocwen Loan
Servicing, LLC, WL 3824640 (N.D. Utah 2010)(quoting White v. Fox, 665 P.2d 1297, 1301
(Utah 1983). Unlike the Plaintiffs in Stanton that alleged a series of very specific oral and written
promises to modify from their mortgage provider, the Dohners do not allege in any of the 92
paragraphs of pleadings that the Wells Fargo defendants made any specific promise, either orally
or in writing, to modify the loan agreement upon which plaintiffs might have relied. They allege
that “Defendants offered Plaintiffs alternatives in January, 2011 but have failed to provide any
opportunity to realize the benefits of the alternatives.” (Compl., ¶ 66.) Whether this portion is
alleged against the Wells Fargo Defendants is uncertain, as other allegations seem to suggest that
these allegations are directed toward BSI. Even if this paragraph is referring to the Wells Fargo
Defendants and taken as true, it does not constitute grounds upon which this court might enforce
an oral promise because no oral promise is alleged.
Insofar as the Dohners attempt to base this cause of action on the Home Affordable
Modification Program (“HAMP”), such claims fail as a matter of law. HAMP does not require
lenders to modify loans. Rather, it requires lenders “to consider borrowers for loan modifications
and suspend foreclosure activities while a given borrower is being evaluated for a modification.”
Marks v. Bank of America, 2010 U.S. Dist. LEXIS 61489, n.3, *14-15 (D. Ariz. June 22, 2010).
Furthermore, “there is no private right of action under HAMP.” Shurtliff v. Wells Fargo Bank,
N.A., 2010 U.S. Dist. LEXIS 117962, *10 (D. Utah Nov. 5, 2010). Even if the court accepts all of
Plaintiffs’ factual allegations as true and draws all reasonable inferences in their favor, Plaintiffs
have not stated a claim for breach of the duty of good faith and fair dealing upon which relief
may be granted.
4. Claim Against Wells Fargo Defendants for Negligent Misrepresentation
Plaintiffs’ negligent misrepresentation claims fail as a matter of law. First, Plaintiffs
claim that Wachovia negligently misrepresented that Plaintiffs “would be able to repay the loan
terms.” (Compl., ¶¶ 70-74.) Specifically, Plaintiffs claim that Wachovia was required to “use
necessary care in proposing the loan” and that it “did not perform reasonable underwriting
analysis” in determining whether Plaintiffs would be able to repay the loan.(Compl., ¶¶ 71-73.)
This court has rejected Plaintiffs’ theory that Wachovia owed Plaintiffs a duty to ensure their
ability to repay their Loan, holding that “under Utah law, a lender does not owe a borrower any
fiduciary duties, including such alleged duty to investigate Plaintiff’s ability to repay a loan.”
Rhodes v. Wells Fargo Home Mortg., 2010 WL 3222414, *4 (D. Utah 2010)(unpublished).
Although “a fiduciary duty may be created between a lender and a borrower depending on
specific facts surrounding the transaction[,]” Stanton, WL 3824640 at 8-9, Plaintiffs have not
alleged facts that would indicate that the relationship here is different from the arms-length
relationship of the typical borrower and lender. Furthermore, Plaintiffs were necessarily in the
best position to know whether they would be able to repay the loan.
Second, Plaintiffs allege that the Wells Fargo Defendants “carelessly or negligently
misrepresented to the Dohners that the value of the home would continue to increase when it did
not.” (Compl., ¶ 75.) This claim also fails as a matter of law, because negligent misrepresentation
claims require that the representation in question be made regarding a “presently existing
material fact.” Giusti v. Sterling Wentworth Corp., 201 P.3d 966,977 (Utah 2009). See also
Cerritos Trucking Co. v. Utah Venture No. 1, 645 P.2d 608, 612 (Utah 1982)(negligent
misrepresentation cases involve a “past or present fact”). Even taken as true, Plaintiffs’
allegations do not qualify as misrepresentations of a presently existing material fact and must,
therefore, fail as a matter of law.
Third, Plaintiffs claim that the Wells Fargo defendants committed TILA violations, which
they argue provides “per se” evidence of misrepresentation. (Compl., ¶¶ 76-77.) The allegations
of TILA violations are unavailing because the Complaint was filed more than one year after the
alleged failure to disclose. TILA expressly provides that a plaintiff must bring claims for
damages under TILA within one year “from the date of occurrence of the violation.” 15 U.S.C.
§1640(e). See also Sanders v. Ethington, 2010 U.S. Dist. LEXIS 133996, *7 (D. Utah Dec. 15,
2010)(“15 U.S.C. §1640(e) clearly places a one-year time limit on a private person’s ability to
bring a damages claim for TILA violations.”)
Fourth, Plaintiffs claim that the Wells Fargo Defendants negligently misrepresented that
the Dohners received the best loan terms for which they qualified when their loan was below
“prime.” (Compl., ¶¶ 76-77.) As set forth above, this misrepresentation claim fails because the
Wells Fargo Defendants had no duty to ensure that Plaintiffs obtained the “best loan.” See
Rogers v. Amberican Brokers Conduit, 2009 U.S. Dist. LEXIS 99745, *8 (D. Utah
2009)(unpublished)(rejecting Plaintiffs’ theory that lender had a duty to ensure loan would be
suitable for borrowers’ circumstances and financial condition). Plaintiffs have not alleged facts
sufficient to demonstrate that the Wells Fargo Defendants took upon themselves such fiduciary
duties. Even if all of Plaintiffs allegations are taken as true, they do not substantiate a claim for
5. Claim Against Wells Fargo Defendants for Violation of the Fair Credit Reporting Act
Finally, Plaintiffs allege that the Wells Fargo Defendants violated the FCRA when they
received the Dohners’ applications for loan modification, accessed their consumer reports and
failed to notify them of an adverse action. (Compl., ¶¶ 87-92.) This claim fails as a matter of law
because there is no private right of action for violation of the notification requirement contained
in 15 U.S.C. § 1681m. The language of 15 U.S.C. § 1681m(h)(8)(A)-(B) clearly states that this
section “shall be enforced exclusively under section 1681s of this title by the Federal agencies
and officials identified in that section.” See Bourdelais v. J.P. Morgan Chase Bank, N.A., 2011
U.S. Dist. LEXIS 35508, *21 (E.D. Va. Apr. 1, 2011) (“Virtually every federal district court and
the only federal court of appeals to interpret § 1681m(h)(8) has found [that] . . . no private right
of action exists for violations of section 1681m in its entirety.”) Thus, Plaintiffs’ Claims for
FCRA violations fail as a matter of law.
For the foregoing reasons, the court grants the motion of defendants Wachovia Mortgage,
FSB, Wells Fargo Home Mortgage, Wells Fargo Bank, N.A., and Mortgage Electronic
Registration Systems, Inc. to dismisses plaintiffs’ complaint with prejudice.
Dated this 13th day of September, 2011.
United States District Court
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?