201 F. Supp. 3d 1222
D. Nev.2016Background
- Shaw (borrower) executed a May 2011 written loan modification (the May 2011 Modification Agreement), signed by Shaw and later signed by CMI VP Bauman; CMI booked its terms and accepted modified payments June–Dec 2011.
- CMI intermittently unbooked the modification and payments in July 2011, sent a different “July 2011” modification with new material terms, and repeatedly gave Shaw inconsistent statements about whether the May 2011 agreement was binding.
- Shaw stopped payments in January 2012 after CMI employees (notably Jennifer Butler) told him the May 2011 agreement was not in force and that he must sign the July 2011 agreement; CMI advanced escrow payments thereafter and pursued foreclosure beginning 2013.
- Shaw sued CMI (after earlier dismissals of other defendants), asserting declaratory relief, breach of contract, breach of implied covenant of good faith and fair dealing (contractual and tort), RESPA violations, intentional interference, and seeking punitive damages.
- The court held a bench trial, found the May 2011 Modification Agreement was a valid, binding contract (effective May 1, 2011), found both actual and anticipatory breaches and a tortious breach of the implied covenant, RESPA violations as to some Qualified Written Requests, but no intentional interference; it awarded declaratory relief, equitable accounting of amounts, compensatory and punitive damages, and statutory RESPA damages.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Existence/validity of May 2011 modification | May executed and returned the signed modification; CMI accepted by booking terms and taking payments | CMI later insisted the May agreement was not binding and required execution of a corrected July agreement | Court: May 2011 agreement was a valid, binding contract (effective May 1, 2011) and recognized nunc pro tunc |
| Breach / damages for breach of modification | CMI breached by unbooking modification, misapplying payments, reporting delinquencies; seeks contract damages | CMI argued any breach was cured when it rebooked the modification and waived fees; limited damages | Court: CMI actually breached but cured on Aug 15, 2011; Shaw not entitled to contract damages because position was restored; interest/fees after Jan 2012 excluded due to anticipatory repudiation |
| Anticipatory repudiation / excuse of performance | CMI’s repeated statements that May agreement was not recognized excused Shaw’s later nonpayment | CMI contended no repudiation and that May 2011 was not legally deficient | Court: CMI expressly repudiated by statements (esp. Dec 2011 onward); Shaw reasonably withheld payments from Jan 2012; charges after that date are excluded |
| Breach of implied covenant (tort vs contract) | CMI’s inconsistent, obstructive conduct frustrated the contract purpose causing reputational and emotional harm; seeks tort damages and punitive relief | CMI said breaches were contract-based and any remedy is contractual; denied tort liability and bad faith | Court: Found contractual breach of implied covenant and, because of special relationship and oppressive conduct, tortious breach; awarded general damages and punitive damages at statutory cap |
| RESPA (qualified written requests) | Shaw sent multiple QWRs seeking owner contact and loan documents; CMI failed to timely/adequately respond | CMI responded to some requests and argued others were not QWRs or were satisfied | Court: Four communications were QWRs; CMI violated RESPA on three requests (failed acknowledgment/production); awarded statutory damages (max) but no pecuniary actual damages |
| Intentional interference with prospective economic advantage (short sales) | CMI’s delays/failures to timely process short-sale offers caused offers to lapse and harmed Shaw | CMI argued delays were justified (missing junior-lien releases) and servicers have no duty to approve short sales | Court: Shaw failed to prove intent or lack of justification; claim dismissed |
Key Cases Cited
- May v. Anderson, 121 Nev. 668 (2005) (existence of contract is a question of law; formation requires mutual intent)
- Kahle v. Kostiner, 85 Nev. 355 (1969) (anticipatory repudiation requires a definite, unequivocal intent not to perform)
- Hilton Hotels Corp. v. Butch Lewis Productions, Inc., 107 Nev. 226 (1991) (implied covenant breach: party may not frustrate purpose of contract; remedies ordinarily contractual)
- Sutton v. State, 120 Nev. 972 (2004) (tort damages for breach of implied covenant available in rare cases involving grievous misconduct)
- Stratosphere Litigation, L.L.C. v. Grand Casinos, 298 F.3d 1137 (9th Cir. 2002) (anticipatory repudiation through conduct or language)
- Mundy v. Household Finance Corp., 885 F.2d 542 (9th Cir. 1989) (breach of implied covenant typically yields contractual remedies)