Cox v. Mortgage Electronic Registration Systems, Inc.
794 F. Supp. 2d 1060
D. Minnesota2011Background
- Foreclosure dispute arising from a 2004 promissory note and mortgage to Universal Mortgage Corporation, with MERS as nominal mortgagee and Aurora as loan servicer after acquisition.
- Plaintiffs sought loan modification under HAMP; in 2009-2010 they made trial payments and were informed they might qualify for modification.
- Aurora determined in early 2010 that modification was not approved due to negative net present value; they placed plaintiffs on a 30-day HAMP review period and advised continued payments.
- In February 2010, Aurora mailed a letter stating modification was not offered and foreclosure may resume; in March 2010, a subsequent notice indicated a 30-day review period with further options possible.
- Foreclosure sale occurred on October 4, 2010; November 2010 plaintiffs filed state court action alleging multiple causes of action and seeking to stay foreclosure; defendants removed to federal court and moved to dismiss.
- Court granted defendants’ motion to dismiss and denied plaintiffs’ motion for a preliminary injunction, finding no private right of action under HAMP and merits deficiencies in all claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether HAMP provides a private right of action. | Cox argued modification rights flow from HAMP. | Defendants contend HAMP creates no private right of action. | No private right of action under HAMP; dismissal warranted. |
| Whether the accounting claim withstands dismissal. | Requests detailed accounting of loan-file activities. | Accounting is an improper equitable remedy and discovery tool; law provides adequate remedies. | Accounting claim dismissed. |
| Whether the mortgagee-duty claim under Minn. Stat. § 580.11 survives. | Statute imposes a general good-faith duty on mortgagees. | Statute does not create a pre-foreclosure fiduciary duty or require pre-foreclosure conduct. | Claim fails; dismissed. |
| Whether the good-faith and fair-dealing claim stands alone apart from contract. | Defendants breached implied covenant by misleading about modification and failing to release file. | No independent claim exists without a breached contract; bad-faith element not shown. | Claim fails; dismissed. |
| Whether the fraud and negligent misrepresentation claims are adequately pleaded. | Statements about modification and 30-day review were false and misleading. | Pleading lacks specificity and facts showing knowledge of falsity, reliance, and damages. | Claims fail; dismissed. |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (pleading standards; plausibility requirement)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (claims must be plausible, not merely possible)
- Border State Bank, N.A. v. AgCountry Farm Credit Servs., 535 F.3d 779 (8th Cir. 2008) (equitable relief such as accounting is extraordinary and not the proper remedy here)
- Sprague Nat'l Bank v. Dotty, 415 N.W.2d 725 (Minn. Ct. App. 1987) (statutory duties; context of foreclosure actions)
- Vernon J. Rockler & Co., Inc. v. Glickman, Isenberg, Lurie & Co., 273 N.W.2d 647 (Minn. 1978) (accounting as an extraordinary remedy)
- Best Buy Stores, L.P. v. Developers Diversified Realty Corp., 636 F. Supp. 2d 869 (D. Minn. 2009) (fraud elements and pleading standards in Minnesota context)
- Orthomet, Inc. v. A.B. Med., Inc., 990 F.2d 387 (8th Cir. 1993) (good faith and fair dealing cannot exist independently of contract)