175 F. Supp. 3d 412
D.N.J.2015Background
- Lawrence and Susan Sarlo refinanced a Wildwood, NJ home in 2003; loan entered default in 2009 after they stopped payments.
- In Feb 2009 Sarlo called Wells Fargo, was told they were “pre‑qualified” for a loan modification ("as low as 2.5%"), and were instructed that delinquency was required to be considered; Wells Fargo sent a follow‑up letter requesting an initial $2,415 payment and stating approval was not guaranteed.
- Plaintiffs tendered the $2,415 check, stopped mortgage payments while waiting, and repeatedly inquired but were not asked for supporting documents; Wells Fargo placed the check in suspense and did not return it.
- Wells Fargo claims it evaluated the Sarlos (including a HAMP review) and denied modification; Plaintiffs say they never received a final evaluation and that a foreclosure action was filed in June 2009 (default judgment entered September 2009).
- Plaintiffs sued in federal court asserting multiple claims under federal and New Jersey law; they later consented to dismiss FDCPA and RESPA counts. Wells Fargo moved for summary judgment on remaining claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Entire controversy doctrine bars suit | Sarlo: claims arise from 2009 modification promise and are separate from 2003 mortgage foreclosure | Wells Fargo: all related claims should have been raised in foreclosure | Court: claims are not germane to the foreclosure and are not barred |
| Breach of contract — promise to modify | Sarlo: Wells Fargo offered a modification, acceptance shown by $2,415 payment | Wells Fargo: no contract formed; letter and notes show only consideration for review, not guaranteed modification | Court: summary judgment denied as to breach for failure to evaluate (a jury could find agreement to evaluate and a breach); denied as to promise to deliver specific modification (no contract) |
| Breach of implied covenant of good faith | Sarlo: Wells Fargo induced default and acted in bad faith by not providing promised modification | Wells Fargo: acted reasonably; no evidence of bad motive or deception beyond ordinary business discretion | Court: dismissed — no evidence of bad faith/malice |
| Negligent misrepresentation | Sarlo: Wells Fargo negligently told them they were "pre‑qualified" | Wells Fargo: "pre‑qualified" is not a false or negligent promise of final approval; documents disclaim guarantees | Court: dismissed — statement was not incorrect or negligently made |
| NJ Consumer Fraud Act (NJCFA) | Sarlo: Wells Fargo engaged in deceptive practice by accepting payment and failing to properly evaluate | Wells Fargo: conducted evaluation and denial; no actionable misrepresentation under CFA | Court: partial denial — NJCFA claim survives limited to failure to properly evaluate and resulting loss (at least $2,415) |
| Slander of credit | Sarlo: credit harm resulted because Wells Fargo told them to stop payments | Wells Fargo: statements that borrowers were in default were true; inducement to stop payments doesn't make truthful report defamatory | Court: dismissed — no false statement to third parties shown |
| Promissory estoppel | Sarlo: relied on Wells Fargo's promise to modify and stopped payments | Wells Fargo: no clear, definite promise was made | Court: dismissed — no clear and definite promise established |
| Intentional/Negligent infliction of emotional distress | Sarlo: severe emotional harm from foreclosure process | Wells Fargo: no outrageous conduct; no severe, medically‑supported distress | Court: dismissed — plaintiffs failed to show severe emotional distress |
Key Cases Cited
- DiTrolio v. Antiles, 142 N.J. 253 (N.J. 1995) (explains the entire controversy doctrine)
- Rycoline Prods., Inc. v. C & W Unlimited, 109 F.3d 883 (3d Cir. 1997) (application of entire controversy doctrine principles)
- Leisure Tech.-Northeast v. Klingbeil Holding Co., 137 N.J. Super. 353 (N.J. Super. Ct. App. Div. 1975) (limits counterclaims in foreclosure to germane claims)
- Wilson v. Amerada Hess Corp., 168 N.J. 236 (N.J. 2001) (states bad‑faith element for breach of implied covenant)
- Cox v. Sears Roebuck & Co., 138 N.J. 2 (N.J. 1994) (defines capacity to mislead as prime ingredient of consumer fraud)
- Buckley v. Trenton Sav. Fund Soc’y, 111 N.J. 355 (N.J. 1988) (standard for intentional infliction of emotional distress; severe distress requirement)
- Celotex Corp. v. Catrett, 477 U.S. 317 (U.S. 1986) (summary judgment standards)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (U.S. 1986) (summary judgment/genuine issue standard)