Victorian v. Wells Fargo Home Mortgage
4:15-cv-00667
E.D. Mo.Jun 12, 2017Background
- Plaintiff Lenore Victorian obtained two adjustable-rate mortgages in 2006: a First Mortgage later acquired by Wells Fargo and a Second Mortgage held by Chase.
- Plaintiff's personal liability on the mortgages was discharged in Chapter 7 bankruptcy in 2010; she later fell delinquent on the First Mortgage and sought a HAMP modification.
- Wells Fargo approved a Trial Period Plan (TPP) under HAMP in Oct 2012; the TPP required timely trial payments and submission of required documents but did not guarantee a permanent modification.
- A title report revealed existing liens, including the Second Mortgage; Wells Fargo required a subordination agreement from Chase (or release of the lien) as a condition to proceed to a permanent modification. Chase refused to subordinate unless paid.
- Plaintiff made the TPP payments but did not obtain Chase’s subordination; Wells Fargo denied permanent modification and later foreclosed after the Second Mortgage was released; Deutsche Bank bought the property at sale.
- Plaintiff sued asserting breach of contract (including implied covenant), fraudulent misrepresentation, MMPA violation, and declaratory relief; court granted summary judgment for Defendants.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the TPP formed an enforceable contract for a permanent modification | TPP was an offer that Victorian accepted by timely payments and submissions, creating contract rights | TPP was a conditional forbearance; no permanent contract formed because conditions (e.g., subordination/clean title) were unmet | TPP was conditional; no contract for permanent modification formed because Plaintiff failed to satisfy conditions |
| Breach of implied covenant of good faith and fair dealing | Wells Fargo acted in bad faith by insisting on subordination it knew about when offering TPP | No enforceable contract existed; thus covenant claim fails as a matter of law | Covenant claim fails because no valid underlying contract existed |
| Fraudulent misrepresentation based on TPP and alleged phone statements | TPP/phone statements implied she qualified for permanent modification; those representations were false/misleading | TPP and communications expressly conditioned permanent modification on satisfying requirements; statements were true | Fraud claim fails: representations were conditional and not proven false; liens were a real impediment |
| MMPA claim ("in connection with the sale") | Wells Fargo’s conduct during modification and foreclosure violated MMPA, causing ascertainable loss | Most acts were modification negotiations (not "in connection with" sale); only foreclosure-related acts could be within MMPA; those acts were not unlawful or damaging here | Grant summary judgment: modification negotiations are not "in connection with" sale under Watson; remaining foreclosure-related allegations do not show unlawful conduct or ascertainable loss |
Key Cases Cited
- Topchian v. JPMorgan Chase Bank, N.A., 760 F.3d 843 (8th Cir.) (explains HAMP two-step TPP-to-permanent modification framework)
- Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547 (7th Cir.) (TPP may be construed as offer of permanent modification if conditions are met)
- Young v. Wells Fargo Bank, N.A., 717 F.3d 224 (1st Cir.) (enforceability where plaintiff satisfied TPP conditions and received modification)
- Watson v. Wells Fargo Home Mortgage, Inc., 438 S.W.3d 404 (Mo.) (loan-modification negotiations are generally not "in connection with" the sale for MMPA purposes; foreclosure/enforcement can be)
- Wivell v. Wells Fargo Bank, N.A., 773 F.3d 887 (8th Cir.) (foreclosure despite promise to suspend sale was "in connection with" loan sale for MMPA)
- Keveney v. Missouri Military Academy, 304 S.W.3d 98 (Mo.) (elements of breach of contract under Missouri law)
- Renaissance Leasing, LLC v. Vermeer Mfg. Co., 322 S.W.3d 112 (Mo.) (elements of fraudulent misrepresentation under Missouri law)