Tanner v. Bank of America, N.A.

Filing 12

ORDER granting in part and denying in part 7 Defendant's Motion to Dismiss for Failure to State a Claim; signed by Judge Ronald B. Leighton.(DN)

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HONORABLE RONALD B. LEIGHTON

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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT TACOMA

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JENNIFER TANNER,
Plaintiff,

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CASE NO. C14-5600 RBL
ORDER GRANTING IN PART AND
DENYING IN PART BANK OF
AMERICA’S MOTION TO DISMISS

v.
BANK OF AMERICA, N.A.,

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DKT. #7

Defendant.

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THIS MATTER is before the Court on Bank of America’s Motion to Dismiss Jennifer

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Tanner’s claims [Dkt. #7]. Tanner alleges, generally, that Bank of America induced her to

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default on her home loan and then required her to pay substantial fees to avoid foreclosure. She

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claims that Bank of America, without her asking, promised to permanently lower her monthly

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payments if she was able to pay the reduced amount during a trial period without defaulting. She

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claims that she did that, but the bank nevertheless revoked the trial plan and determined that she
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was in default.
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Tanner is now suing Bank of America for how it managed her loan. She seeks damages

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for breach of contract, negligent misrepresentation, and fraud, and treble damages for breach of

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the Washington Consumer Protection Act. Bank of America seeks to dismiss all of Tanner’s

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ORDER - 1

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claims. It contends that Tanner has not identified any enforceable contract provision that it has

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breached, has not alleged any unfair or deceptive practice that can support her CPA claim, has

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not pleaded fraud with the required specificity, and, alternatively, that all of her claims are
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implausible.
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I.

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BACKGROUND

Tanner borrowed money to buy a home in 2003. Bank of America owns the deed of trust

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securing her loan. Tanner fell behind on her payments in late 2009 or early 2010. After she

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caught up, Bank of America invited her to participate in the Home Affordable Mortgage

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Program (HAMP). HAMP is a federal program designed to give banks incentives to refinance

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distressed homeowners’ loans. Participating banks receive money from the federal government
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if they agree to follow Treasury Department guidelines and procedures and modify qualified
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applicants’ loans.

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Tanner alleges that Bank of America told her that all she had to do to qualify for a

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permanent loan modification was successfully complete a HAMP trial period plan. According to

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Tanner, the trial plan only required her to pay about $400 less a month than her normal loan

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payments. She admits that she never submitted an application or any other paperwork to be

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considered for a loan modification, but she claims that Bank of America never asked her to.
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Tanner alleges that she made the lower payments for nearly a year before Bank of

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America terminated the trial plan without notice. When the bank revoked Tanner’s trial plan, it

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also determined that she was in default and demanded that she pay nearly $5,700 in addition to

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her normal monthly payments to catch up on her loan. Tanner got a second job to avoid

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foreclosure and struggled for two years to pay off the balance. She claims that during that time,

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Bank of America routinely under-credited her payments and charged excessive, unexplained, and
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unsubstantiated fees. Even so, she paid off her balance in early 2012. Tanner initiated this

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action two years later.

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II.

DISCUSSION

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A.

Motion to Dismiss Standard

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Dismissal under Rule 12(b)(6) may be based on either the lack of a cognizable legal

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theory or the absence of sufficient facts alleged under a cognizable legal theory. Balistreri v.

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Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). A complaint must allege facts to state a

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claim for relief that is plausible on its face. See Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009).

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A claim has “facial plausibility” when the party seeking relief “pleads factual content that allows
the court to draw the reasonable inference that the defendant is liable for the misconduct

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alleged.” Id. Although the Court must accept as true a complaint’s well-pled facts, conclusory
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allegations of law and unwarranted inferences will not defeat an otherwise proper Rule 12(b)(6)

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motion. Vasquez v. L.A. County, 487 F.3d 1246, 1249 (9th Cir. 2007); Sprewell v. Golden State

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Warriors, 266 F.3d 979, 988 (9th Cir. 2001). “Factual allegations must be enough to raise a right

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to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)

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(citations and footnote omitted).

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B.

HAMP Trial Plan Breach of Contract Claim

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Tanner claims that Bank of America was contractually required to offer her a permanent
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loan modification because she complied with all of her trial plan requirements. An enforceable

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contract requires an offer, acceptance, and mutual consideration. Storti v. Univ. of Wash., 181

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Wash. 2d 28, 36, 330 P.3d 159, 163 (2014). A breach of contract claim is actionable if “the

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contract imposes a duty, the duty is breached, and the breach proximately causes damage to the

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claimant.” Northwest Indep. Forest Mfrs. V. Dep’t of Labor & Indus., 78 Wash.App. 707, 712,

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899 P.3d 6 (1995).
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A HAMP trial plan can be an enforceable contract. See Corvello v. Wells Fargo Bank,
NA, 728 F.3d 878 (9th Cir. 2013). If a borrower fulfills all of its trial plan obligations, the bank

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must offer a permanent modification or notify the borrower that he or she did not qualify to
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participate in HAMP and consider alternatives. Id. To create an enforceable contract, however,
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the borrower must agree to do something more than pay a discounted amount to satisfy his or her

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prior debt. See Harris v. Morgensen, 31 Wash.2d 225, 240 196 P.2d 317 (1948) (promise to

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perform an existing legal obligation is not valid consideration unless the existence of the duty is

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the subject of honest and reasonable dispute); see also Restatement (Second) of Contracts § 73

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(1981). The new consideration does not have to be much. Any new bargained for legal

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detriment can serve as valid consideration. Storti at 37, 330 P.3d at 164. For example, other
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courts have found sufficient consideration when the borrower agreed to open new escrow
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accounts, undergo credit counseling, or even just make accurate financial disclosures. See Wigod

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v. Wells Fargo Bank, N.A., 673 F.3d 547, 564 (7th Cir. 2012); Ansanelli v. JP Morgan Chase

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Bank, N.A., 2011 WL 1134451 (N.D. Cal 2013) (borrower’s financial disclosures sufficient

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consideration). But absent new consideration, a trial plan does not create a contract.

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Here, Tanner contends that her consideration was making the lower trial plan payments

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instead of her regular mortgage payments, and, thus, defaulting on her loan. She claims that part

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of her consideration was giving up her status as “current” on her loan. While defaulting on her

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loan might demonstrate damages, merely paying a reduced amount on a prior debt cannot, by

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itself, be valid consideration. She affirmatively states in her complaint that she did not fill out an
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application, provide the bank with any financial information, or do anything other than make
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reduced payments on her prior loan. Her complaint, thus, fails to state an actionable breach of

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contract claim. Because she alleges that she did nothing more than make reduced monthly

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payments, amendment would be futile. Bank of America’s motion to dismiss Tanner’s breach of

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the trial plan contract is GRANTED and her claim is DISMISSED WITH PREJUDICE.

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C.

Promissory Estoppel

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Tanner alternatively seeks to enforce Bank of America’s alleged promise through
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promissory estoppel. Even if a promise is not supported by consideration, it may be enforced

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through promissory estoppel if necessary to avoid injustice. King v. Riveland, 125 Wash.2d 500,

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506, 886 P.2d 160, 164 (1994). Promissory estoppel claims require a plaintiff to plead five

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elements to state a claim: “1) a promise which 2) the promisor should reasonably expect to

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cause the promisee to change his position and 3) which does cause the promisee to change his
position 4) justifiably relying upon the promise, in such a manner that 5) injustice can be avoided

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only by enforcement of the promise.” Id.
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Tanner’s complaint alleges that Bank of America promised to permanently modify her

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loan if she was able to make the reduced payments during the trial plan without defaulting. She

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claims that she called the bank to ask about the offer. According to Tanner, the bank’s

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employees told her that she had to stop making her full payments and instead make the reduced

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trial plan payments if she wanted to be considered for a loan modification. Because she relied on

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the bank’s promise, she defaulted on her loan and had to pay fees that she would not have had to
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pay if she had stayed current.
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It seems unlikely that Bank of America promised to modify her loan without requiring, or

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at least intending to require, her to do anything more than make reduced payments. It is not

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implausible, however, that she somehow slipped through the cracks and Bank of America never

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sent a follow-up request for more information. If Tanner is able to prove her allegations, she

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may be able to recover under promissory estoppel. Bank of America’s motion to dismiss

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Tanner’s trial plan promissory estoppel claim is DENIED.
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D.

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Breach of Underlying Mortgage Contract and Breach of Covenant of Good
Faith and Fair Dealing Claims

Tanner also asserts that Bank of America breached the underlying mortgage contract and

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its implied duty of good faith and fair dealing by erroneously determining that she was in default,

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charging “exuberant and unexplainable fees,” and not fully crediting her payments. Every

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contract has an implied duty of good faith and fair dealing. Badgett v. Security State Bank, 116

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Wash.2d 563, 569, 807 P.2d 356, 360 (1991). That duty, however, does not inject substantive

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terms into the contract, require a party to forego its rights under the contract, or require a party to
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accept a material change to the contract terms. Id.

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Tanner admits that she did not make her full payments for nearly a year. She also admits

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that Bank of America had the right charge late fees if she was in default. The bank, thus, did not

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breach the contract by determining that she was in default. The bank also could not have

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breached the contract, or its implied duty of good faith and fair dealing, by charging late fees,

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generally. But, to the extent that she alleges the bank did not fully credit her payments and
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charged fees above and beyond what the promissory note allows, she has stated a viable breach
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of contract claim.

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To the extent Tanner claims that the bank breached the underlying contract by

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determining she was in default and charging late fees, generally, Bank of America’s motion to

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dismiss is GRANTED. Because amendment would be futile, leave to amend is denied. To the

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extent that she alleges that the bank charged fees that they were not entitled to and did not fully

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credit her payments, Bank of America’s motion is DENIED.
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E.

Washington Consumer Protection Act Claim

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Tanner’s CPA claim is based on the same allegations that support her breach of contract
claims. To state an actionable CPA claim, a plaintiff must allege (1) an unfair or deceptive act or

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practice; (2) that occurs in trade or commerce; (3) that has an impact on the public interest; (4)

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injury to the plaintiff in his or her business or property; and (5) a causal link between the unfair

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or deceptive act and the injury suffered. Hangman Ridge Training Stables, Inc. v. Safeco Title
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Ins. Co., 105 Wn.2d 778, 784-85, 719 P.2d 531, 535 (1986). An unfair or deceptive act is one
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that has the capacity to deceive a substantial portion of the public. Id. at 785, 719 P.2d at 535.

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Breach of a private contract that affects only the parties ordinarily is not an act or practice that

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has an impact on the public interest. Id. (citing Lightfoot v. MacDonald, 86 Wash. 331, 334, 544

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P.2d 88 (1976)). A private dispute has an impact on the public interest only if other parties have

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been or likely will be injured in the exactly the same way. Id.

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Tanner’s claims fail to give rise to an inference that Bank of America’s alleged
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misconduct has an impact on the public interest. Bank of America, as a HAMP participant,
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undoubtedly regularly invites distressed homeowners to seek loan modifications. Under HAMP,

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banks are supposed to require borrowers to take affirmative steps to obtain a modification.

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Borrowers have to submit an application, make financial disclosures, and sign certain documents

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at various stages of the process. See Wigod at 556-58 (describing HAMP modification process);

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see also Corvello at 880-81.

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Tanner’s allegation that she was never asked to take any of the usually required steps
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makes her claims unique. If she can prove that she somehow fell through the cracks, she may

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ultimately prevail on other claims. But nothing in the complaint suggests that this dispute affects

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anyone other than these parties. Because Tanner’s allegations do not reasonably give rise to the

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inference that Bank of America’s alleged misconduct has an impact on the public interest, Bank

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of America’s motion to dismiss Tanner’s CPA claim is GRANTED. It is unlikely that the

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deficiency can be cured, but it is not clear that amendment would be futile. Tanner, thus, has

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leave to amend.

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F.

Fraud and Negligent Misrepresentation Claims

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To state an actionable negligent misrepresentation claim, a plaintiff must allege that 1)
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the defendant supplied false information to others for guidance in their business transactions; 2)

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the defendant knew or should have known that the information was supplied to guide the

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plaintiff in his business transactions; 3) the defendant negligently obtained or communicated the

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information; 4) the plaintiff relied on the false information; 5) the plaintiff’s reliance was

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reasonable; and 6) the false information proximately caused the plaintiff damages. Ross v.
Kirner, 162 Wash.2d 493, 499-500, 172 P.3d 701, 704 (2007). A fraud claim requires similar

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elements but requires that the defendant knew that the information was false or was ignorant of
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its truth. Kirkham v. Smith, 106 Wn. App. 177, 183 P.3d 10 (2001).

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Tanner’s allegations that the bank, and its employees, told her that all she had to do to

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obtain a HAMP modification was make lower payments during the trial plan may support her

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fraud and negligent misrepresentation claims. She will likely have a difficult time actually

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proving these claims, but she has alleged enough to get past the initial pleading stage. Her

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allegations that the bank provided her with “inaccurate” and “misleading” information about
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reinstating her loan, however, will not suffice. Bald allegations that information was inaccurate
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or misleading without specifying what the information was and how it was false cannot support

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fraud and negligent misrepresentation claims. Bank of America’s motion to dismiss Tanner’s

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negligent misrepresentation and fraud claim regarding the alleged false reinstatement

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information is GRANTED. Its motion to dismiss Tanner’s negligent misrepresentation and

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fraud claim regarding the alleged false information about the HAMP modification and trial plan,

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however, is DENIED.
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III.

CONCLUSION

For these reasons, Bank of America’s motion to dismiss [Dkt. #7] is GRANTED IN

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PART AND DENIED IN PART as specified above.
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IT IS SO ORDERED.
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Dated this 7th day of November, 2014.

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RONALD B. LEIGHTON
UNITED STATES DISTRICT JUDGE

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