493 F. App'x 548
5th Cir.2012Background
- Pennington and Smith sued HSBC Bank USA and Wells Fargo in state court for state-law claims including breach of contract, negligent misrepresentation, and Texas constitutional/Deceptive Trade Practices issues, seeking injunctive relief to stop foreclosures; banks removed to federal court and the district court dismissed, which the Fifth Circuit affirms.
- 2004 home equity loan; 2009 hardship due to job loss led to HAMP participation steps; Step One Trial Period Plan (TPP) offered with three reduced payments and hardship certification requirements.
- Trial payments under the TPP were insufficient to cover full loan amounts; after ten trial payments, bank cited Texas Cash Out Policy preventing modification since debt exceeded original amount.
- Smith entered the TPP but alleges she was told in early 2011 she would be approved for Step Two; later, in May 2011, the bank allegedly refused modification on the basis of illegality, causing her to miss a payment.
- Plaintiffs contend the TPP/Step Two modification violated Tex. Const. art. 16, §50(a)(6), breached TPP/Modification Agreement, and supported negligent misrepresentation and estoppel theories; the court dismisses, holding no binding contract formed and eligibility/independence of claims lacking.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether TPP/Modification Agreements create a binding contract | Penningtons/Smith contend the TPP/Step Two form a contract obligating modification | Bank argues no contract exists absent signed documents; TPP requires execution | No binding contract formed; signed copies required; contract formation not shown. |
| Whether Smith was financially eligible for a HAMP modification | Smith alleges eligibility under TPP conditions | Eligibility required continued hardship representations; failure to maintain qualifies termination | Smith ineligible; financial-hardship representations continued to be true are preconditions. |
| Whether the Penningtons’ breach-of-TPP claim survives without a signed contract | Pennington breach if TPP/Step Two should have been offered | No contract due to lack of lender signature; no breach | Claim fails for lack of a binding contract and required signatures. |
| Whether the Modification Agreement claim against Smith is viable | Bank would modify if legal, so breach if not | No modification without lender signature per Step Two; no binding agreement | No viable breach; Modification Agreement not binding absent bank’s signature. |
| Whether negligent misrepresentation and promissory estoppel survive | Reliance on bank’s statements about legality of modification caused damages | Interest/fees accrual independent of TPP; no compensable reliance damages; no promise-likelihood of modification | Misrepresentation and promissory estoppel fail; no recoverable damages from reliance. |
Key Cases Cited
- Cerda v. 2004-EQR1 L.L.C., 612 F.3d 781 (5th Cir. 2010) (foreclosure context; validity of forbearance terms under 50(a)(6))
- English v. Fischer, 660 S.W.2d 521 (Tex. 1983) (promissory estoppel elements in Texas)
- E.R. Dupuis Concrete Co. v. Penn Mut. Life Ins. Co., 137 S.W.3d 311 (Tex. App.-Beaumont 2004) (negligent misrepresentation framework in Texas)
- Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547 (7th Cir. 2012) (discusses TPP as contract; reliance on modification terms)
- Soin v. Fed. Nat’l Mortg. Ass’n., No official reporter; 2012 WL 1232324 (E.D. Cal. 2012) (contractual language matching TPP; binding effect threshold)