552 F. App'x 473
6th Cir.2014Background
- In 2002, the Smiths obtained a loan to buy property in Antioch, Tennessee, signing a $64,000 promissory note and a deed of trust.
- The note and mortgage expressly contemplated transfer of the note and possible involvement of a loan servicer in the loan structure.
- The note was sold and securitized, and servicing continued via a loan servicer, despite the Smiths’ expectation of a traditional lender relationship.
- The Smiths filed a Second Amended Complaint in 2012 asserting claims including rescission/reformation, lack of standing, breach of contract for securitization, and various tort and statutory claims.
- The district court dismissed in 2013 on the ground that the note and mortgage did not grant an enforceable contractual right to modify the loan and lacked basis for rescission or reform.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Smiths have a contractual right to loan modification | Smiths: there was mutual assent to a modification authority. | Countrywide/BANA: contract language shows no such right; modification is not guaranteed. | No contractual right to modification; dismissed. |
| Whether securitization and loan servicing breached the contract | Smiths: securitization/servicer eliminated modification rights and harmed contract. | Contract allowed transfer and servicer involvement; no breach. | No breach; securitization not a contract violation. |
| Whether there is a plausible claim for fraudulent modification | Smiths: defendants misrepresented modification options for foreclosure leverage. | No specific misrepresentations pleaded with particularity. | Fraud claim failed; not pleaded with particularity. |
| Whether BANA had authority to foreclose given the assignment via MERS | Smiths contested proper assignment/authority to foreclose. | MERS had authority as nominee; BANA could foreclose. | MERS authority to assign; BANA had foreclose authority. |
| Whether remaining claims were properly abandoned on appeal | Smiths asserted multiple theories beyond those addressed. | Appellant abandoned those claims by not briefing them. | Claims abandoned on appeal. |
Key Cases Cited
- Sikora v. Vanderploeg, 212 S.W.3d 277 (Tenn. Ct. App. 2006) (mutual mistake standards in contract reform)
- Pugh's Lawn Landscape Co. v. Jaycon Dev. Corp., 320 S.W.3d 252 (Tenn. 2010) (mutual mistake requires injury to rescind)
- 84 Lumber Co. v. Smith, 356 S.W.3d 380 (Tenn. 2011) (read contract; signed contracts binding)
- Lamb v. MegaFlight, Inc., 26 S.W.3d 627 (Tenn. Ct. App. 2000) (fraud/particularity requirements)
- Dobbs v. Guenther, 846 S.W.2d 270 (Tenn. Ct. App. 1992) (elements of fraud under Tennessee law)
- Ashcroft v. Iqbal, 556 U.S. 662 (S. Ct. 2009) (pleading standard; plausibility required)
- Homestead Grp., LLC v. Bank of Tenn., 307 S.W.3d 746 (Tenn. Ct. App. 2009) (duty of disclosure in certain fiduciary-like contexts)