Gaughan v. New American Funding LLC
2:23-cv-00641
E.D. Wis.Sep 24, 2024Background
- Plaintiff David P. Gaughan, an attorney, sought to refinance his mortgage with Defendant New American Funding, LLC (NAF), after being solicited by NAF in connection with an existing mortgage.
- Plaintiff alleges that in January 2021, NAF's loan officer indicated via email that Gaughan’s refinance loan was "good and approved," with specific terms.
- Plaintiff claims he relied on this approval, stopped pursuing alternative offers, paid down debts, and completed additional paperwork and documentation as required by NAF.
- NAF later denied the refinance after further underwriting, allegedly due to income qualification issues, and Gaughan sued for breach of contract and violation of Wis. Stat. § 100.18 (misrepresentation to the public).
- The court previously denied in part and granted in part a motion to dismiss, allowing both claims to proceed; at summary judgment, only these two causes of action remained.
- The core dispute is whether mutual assent and consideration existed for an enforceable contract as of the alleged "approval" email, and whether Gaughan was a member of "the public" under §100.18 at the time of alleged misrepresentations.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Existence of Enforceable Contract | Approval email/communications established binding contract | No contract—terms indefinite, no consideration, barred by statute/frauds | Genuine dispute of fact; summary judgment denied |
| Consideration | Forbearance of other offers, paid down debts, changed finances | No forbearance; plaintiff pursued other lenders | Sufficient dispute of fact for trial |
| Statute of Frauds | Satisfied via exchange of writings and conduct | No signed writing with all material terms | Defense waived and/or not persuasive |
| Wis. Stat. § 100.18 (Public Member) | Misrepresentations took place before contract formation | Gaughan was not a public member due to existing lender-customer relationship | Gaughan not a public member; claim dismissed |
Key Cases Cited
- Matthews v. Wis. Energy Corp., 534 F.3d 547 (7th Cir. 2008) (basic elements for breach of contract in Wisconsin)
- Hardscrabble Ski Area, Inc. v. First Nat’l Bank, 166 N.W.2d 191 (Wis. 1969) (under Wisconsin law, lender can be liable for failing to lend as contracted)
- Schwartz v. Federated Realty Group, Inc., 436 N.W.2d 34 (Wis. Ct. App. 1988) (implied-in-fact contracts from lender conduct and representations)
- Goossen v. Estate of Standaert, 525 N.W.2d 314 (Wis. Ct. App. 1994) (loan origination fees as consideration in mortgage contract)
- Chris Hinrichs & Autovation Ltd. v. DOW Chem. Co., 937 N.W.2d 37 (Wis. 2020) (public member status for Wis. Stat. § 100.18 claims)