Carlson v. First Horizon Home Loans et al

Filing 23

MEMORANDUM DECISION- granting 9 Motion for Judgment on the Pleadings. Plaintiffscomplaint is DISMISSED with prejudice. Case Closed. Signed by Judge David Sam on 1/19/12. (jmr)

THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH
CENTRAL DIVISION
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
)
NICKELLE L. CARLSON, an
individual,
)
Case No. 2:11CV606 DS
Plaintiff,

)
MEMORANDUM DECISION

vs.

)

JPMORGAN CHASE BANK, N.A.,
a National Association;
andd DOES 1-5,
Defendants.

)
)

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
This matter is before the court on defendant JPMorgan Chase
Bank’s (“Chase”)

motion

for

judgment

on

the

pleadings.

All

briefing is complete and the court is prepared to rule without the
assistance of oral argument. While the court notes plaintiff’s
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 for judgment on the
pleadings will therefore be determined by the court on the basis of
the written memoranda of the parties.
Standard of Review
Plaintiff

is correct

that

a

motion for

judgment

on

the

pleadings under Fed. R Civ. P. 12(c)is treated as a motion to
dismiss under Fed. R. Civ. P. 12(b)(6).

Accordingly, the court

will accept all well-pleaded allegations of the complaint as true

and construe them in the light most favorable to plaintiff. 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).

Nevertheless, if the complaint fails to state a

plausible claim for relief it will be an appropriate candidate for
dismissal. 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).
Background
Plaintiff’s Complaint alleges four claims against defendant
Chase: Negligent misrepresentation, breach of contract, and breach
of duty of good faith and fair dealing, and negligent infliction of
emotional distress.
On or about December 10, 2007, plaintiff executed a promissory
note in favor of defendant First Horizon Home Loans as lender.
Compl. at 8.

Chase is the servicer of plaintiff’s loan. Compl. at

3. Prior to December 2008, Plaintiff became delinquent on the
payments owing under the loan agreement. Compl. at 24. Plaintiff
consulted with a Chase representative about a loan modification in
June 2009, and Plaintiff was advised that she must be in default to
qualify for a loan modification. Compl. at 28. As a result of her
conversations with Chase, plaintiff stopped making her mortgage

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payments. Compl. at 29, 30. In 2009, plaintiff applied twice for a
loan modification but her application was denied. Compl. at 31-57.
Negligent Misrepresentation
Plaintiff’s First Cause of Action seeks damages for alleged
negligent misrepresentations made by Chase that plaintiff should
cease making payments on her mortgage in order to qualify for a
loan modification.

Defendant argues that the economic loss rules

bars plaintiff’s claims.
created

doctrine

that

“The economic loss rule is a judicially
marks

the

fundamental

boundary

between

contract law, which protects expectancy interest created through
agreement

between

the

parties,

and

tort

law,

which

protects

individuals and their property from physical harm by imposing a
duty of reasonable care.” Def. Memo in Supp. at 4 citing SME Indus.
Inc. V. Thompson, Ventulett, Stainback & Assoc., Inc., 28 P.3d 669,
679 (Utah 2001).
Despite plaintiff’s arguments to the contrary, which include
her allegations of severe emotional distress and diagnosis of
multiple sclerosis,
connection

the

between

misrepresentation

and

court

finds

plaintiff’s
her

alleged

that

there

claim
diagnosed

is

for

no

causal

negligent

physical

injury.

Plaintiff’s own allegations indicate other sever traumatic events
occurring in her life at precise the time of the events surrounding
her loan modification request which bolsters the court’s conclusion

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that a jury could not find in plaintiff’s favor on the issue of
causation without serious speculation.
This

court’s

finding

that

the

economic

loss

rule

bars

plaintiff’s claim for negligent misrepresentation is supported by
Judge Stewart’s ruling in Anderson v. Homecoming Financial, LLC, et
al., 2011 WL 2470509 (D. Utah) where a borrower claimed that his
lender negligently represented he should stop making mortgage
payments so that he could apply for a loan modification. Both
plaintiff in the instant case as well as the borrower in Anderson
made deliberate decisions to delay their mortgage payments and must
accept the consequences outlined in the loan agreements.
Finally, under Utah law, to recover on a claim for negligent
misrepresentation, plaintiff must show that the defendant owed the
plaintiff a duty. See Webb v. Univ. of Utah, 125 P.3d 906, 909
(Utah 2005). Chase does not owe a duty to plaintiff based on the
facts plead in the complaint.

Plaintiff’s arguments that Chase

exercised extraordinary influence over her and that she reasonably
placed her trust and confidence in Chase are to no avail.

The

transaction at issue was an arms-length business transaction.
Chase was acting in its own best interest and none of the facts
outlined in the complaint justify any contrary conclusion. See
First Security Bank of Utah, N.A. v. Banberry Development Corp.,
786 P.2d 1326, 1332-34 (Utah 1989).

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Accordingly, plaintiff’s claim for negligent misrepresentation
fails as a matter of law for the reasons stated by the court and
expressed more fully in defendant’s memoranda.
Breach of Oral Contract
Plaintiff’s claim for breach of the oral contract allegedly
entered

into

with

Chase

“to

process

her

loan

modification

application in good faith and in a timely manner” (Compl. at 79)
also fails as a matter of law.

Plaintiff did not plead promissory

estoppel in her complaint and the court will not allow her to do so
now.

Hence, the statute of frauds does apply to the facts as

alleged by plaintiff because, in the court’s view, the alleged oral
contract is a credit agreement and thus governed by Utah Code Ann.
Section 25-5-4, Utah’s statute of frauds.
Plaintiff cites Utah Code Ann. Section 25-5-4(2)(c)
to support her proposition that since Chase rendered financial
advice and/or consulted with plaintiff when it told her to default
and make no further mortgage payments, and a confidential or
fiduciary relationship existed between Chase and plaintiff, and
Chase’s actions fall outside the scope of Subsection 2(b), Chase
cannot claim that a credit agreement was created.
Both sides cite law from various outside jurisdictions to
support their interpretation of Utah’s credit agreement statute of
frauds, Utah Code Ann. 25-5-4(c), because there is no relevant Utah
case law.

The court finds defendant’s citation of Louisiana law

5

most relevant and persuasive. In Bowen v. Wells Fargo Bank. N.A.,
2011 WL 3627320, *6 (M.D. Fla. Aug. 17, 2011), “the Louisiana
Supreme Court held that plaintiff’s cause of action seeking to
enforce an offered alleged oral agreement by his lender to modify
his loan conditioned upon his loan payments being at least 90 days
past due, which offer plaintiff accepted by stopping to make his
payments and providing all requested financial information, was a
‘credit agreement’ precluded by the statute of frauds.” Defs. Reply
Mem. at 10. Especially given the court’s finding that there was no
special or

fiduciary

relationship,

Plaintiff’s

arguments

make

little headway toward a different conclusion, and in fact support
the court’s finding that the statute of frauds does indeed apply.
Neither relevant law nor common sense support a finding that an
alleged oral agreement to modify the repayment terms of the loan
agreement between plaintiff and defendant does not amount to a
financial accommodation.
Furthermore, Chase effectively argues, and the court finds,
that the statute of frauds precludes not only plaintiff’s breach of
oral contract claim, but it also bars plaintiff’s related claims
for negligent misrepresentation, breach of the covenant of good
faith and fair dealing, and negligent infliction of emotional
distress.

It is good law to conclude that Utah’s statute “bars all

actions for damages arising from oral credit agreements, regardless
of the legal theory of recovery asserted” since the oral credit

6

agreement on which the claims are asserted is invalid, void, and
outside the law.

See Jesco Const. Corp. V. Nationsbank Corp., 830

So.2d 989, 992 (La. 2002).
Finally, it is beyond reason to find that the facts alleged by
plaintiff created a binding contract. Chase did not benefit in any
way from plaintiff’s actions. There was no enforceable contract,
there was no consideration given, and there was no meeting of the
minds as to the definite terms. This issue has been reviewed and
decided on several occasions by this court.

See Osmond v. Litton

Loan Servicing, LLC, 2011 WL 1988403, *2 (D. Utah)(“A meeting of
the minds must include a clear and mutual understanding of the
essential terms, which cannot be indefinite. . . . It is not
possible to create an enforceable contract in which the parties
generically agree to modify another contract that has definite
terms.” (citations omitted).
Accordingly,

the

court

finds

plaintiff’s

breach

of

oral

contract claim fails as a matter of law.
Breach of Good Faith and Fair Dealing
The court’s previous finding that the statute of frauds
applies and therefore plaintiffs claims, including breach of good
faith and fair dealing, are barred disposes of this claim.
addition,
Mortgage

this
FSB,

court’s
2011

WL

earlier

ruling

4064067

(D.

7

in

Utah

Dohner
Sept.

v.

13,

In

Wachovia
2011)

is

controlling and dispositive.

Accordingly, plaintiff’s claim for

breach of good faith and fair dealing are dismissed.
Negligent Infliction of Emotional Distress
Last, the court will briefly address plaintiff’s claim for
negligent infliction of emotional distress. The activities outlined
in paragraphs 31-61, taken as true, were poor business practices
and undoubtedly frustrating to the plaintiff. But they do not rise
to the extreme and outrageous level.
Plaintiff

attempted

to

distinguish

the

cases

cited

by

defendant, but she did not cite one case that supports this court’s
finding, on the facts alleged, that Chase is liable for negligent
infliction of emotional distress. Plaintiff argues the cases cited
by Chase were not directly on point given plaintiff’s allegation of
physical injury, but the court has already addressed the causation
problems attendant plaintiff’s diagnosis for multiple sclerosis.
Furthermore, plaintiff’s allegation that her claim is based on
emotional

distress

reliance

on

resulting

Chase’s

from

defaulting

representations

which

on

her

loan

in

allowed

her

to

substantially increase her default and be led through a two-year
cycle of stress caused by

Chase is of no consequence.

The

negligent infliction of emotional distress law is well-developed.
Plaintiff’s

allegations,

taken

as

true,

do

requisite level to defeat a motion to dismiss.

8

not

rise

to

the

For the foregoing reasons, as well as those detailed in the
memoranda filed by the parties, the court hereby GRANTS defendant’s
motion for judgment on the pleadings in its entirety.

Plaintiff’s

complaint is DISMISSED with prejudice.
SO ORDERED.

DATED this 19th day of January,2012.
BY THE COURT:

DAVID SAM
SENIOR JUDGE
UNITED STATES DISTRICT COURT

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