Shelby E. WATSON, Appellant, v. WELLS FARGO HOME MORTGAGE, INC., et al., Respondents.
No. SC 93769.
Supreme Court of Missouri, En Banc.
Aug. 19, 2014.
438 S.W.3d 404
IV. CONCLUSION
The statute does not contemplate treating two separate corporations in a contractual relationship as a single tax entity for the limited purpose of obtaining a sales tax refund. The regulation relied on by the retailers to argue to the contrary cannot expand the statute and, by its terms, does not apply to retailers who do not incur bad debts because they have been fully reimbursed for the sales tax amounts they remitted to the state. The decision of the AHC is reversed, and the case is remanded.
All concur.
Mitchell B. Stoddard, Consumer Law Advocates, St. Louis, for Watson.
David T. Hamilton, John H. Kilper, Hazelwood & Weber LLC, St. Charles, for Wells Fargo and Fannie Mae.
James Layton, Bryan Bear, Attorney General‘s Office, Jefferson City, for Attorney General.
Dale K. Irwin, Gina Chiala, Slough Connealy Irwin & Madden LLC, Bernard E. Brown, Lee R. Anderson, The Brown Law Firm, Kansas City, for National Consumer Law Center.
MARY R. RUSSELL, Chief Justice.
Here, Watson alleged that Wells Fargo violated the MMPA in two ways: (1) wrongfully foreclosing on the deed of trust; and (2) engaging in bad faith negotiations of a loan modification, even though there was no obligation to renegotiate under the terms of the original loan. To the extent Watson‘s allegations relate to the wrongful foreclosure, summary judgment is not appropriate pursuant to Conway. However, because Wells Fargo was not enforcing the terms of the original loan when it negotiated the loan modification, its actions did not violate the MMPA as they were not “in connection with” the sale of the original loan. The trial court‘s judgment is affirmed in part and reversed in part, and the case is remanded.
Factual Background
To finance the purchase of a new home in 2006, Shelby Watson obtained a loan from Mortgage Resources in the Midwest that was secured by a deed of trust on the property. The deed of trust stated that Mortgage Resources was not under any obligation to renegotiate the terms of the loan. Wells Fargo began servicing the loan soon thereafter.
When Watson became unable to make the monthly payments, she requested a loan modification from Wells Fargo. According to Watson, her request was approved, but she did not learn of the approval until after the deadline to accept the new terms. Wells Fargo then invited her to apply for a second modification. Watson contends that she accepted the second modification and that Wells Fargo ratified the modification. According to Wells Fargo, the two parties engaged in discussions related to the loan modification but never reached an agreement. Wells Fargo foreclosed on the property and sold it to Fannie Mae.
Watson then filed a single-count petition alleging that Wells Fargo violated the MMPA. Wells Fargo filed a motion for summary judgment, arguing that Watson could not produce evidence that Wells Fargo‘s actions were done “in connection with” the sale of the loan. Wells Fargo argued that its actions did not relate to any claims or representations made before or at the time Watson first obtained the loan and that it was not a party to the transaction when Watson first obtained the loan. The trial court entered judgment for Wells Fargo, and Watson appeals. This Court granted transfer pursuant to
Standard of Review
An appellate court‘s review of a motion for summary judgment is essentially de novo. ITT Commercial Fin. Corp. v. Mid-Am. Marine Supply Corp., 854 S.W.2d 371, 376 (Mo. banc 1993);
Analysis
Watson alleges that Wells Fargo violated the MMPA by: (1) negotiating the loan
The MMPA, as first adopted by the legislature in 1967, protects consumers by expanding the common law definition of fraud “to preserve fundamental honesty, fair play and right dealings in public transactions.” State ex rel. Danforth v. Independence Dodge, Inc., 494 S.W.2d 362, 368 (Mo.App.1973); see Huch v. Charter Commc‘ns, Inc., 290 S.W.3d 721, 725-26 (Mo. banc 2009). For this purpose,
While the MMPA states that a violation can happen at any time before, during or after a sale, it does not set out when an unlawful act is committed “in connection with” the sale. In Conway v. CitiMortgage, decided today, this Court examined “in connection with” in the loan collection context. In Conway, the plaintiffs alleged that the defendants wrongfully foreclosed on the deed of trust that the plaintiffs executed when they purchased their property. 438 S.W.3d at 413. Conway held that when the operative transaction is the procurement of a loan, the “sale” is not complete when the lender extends the credit, but continues throughout the time the borrower is making payments on the loan. Id. at 415. The enforcement of the loan‘s terms is “in connection with” the sale of the loan because the sale continues for the life of the loan. Id. at 415. In the context of an alleged wrongful foreclosure, the plaintiff was able to state a claim under the MMPA against the foreclosing entity, regardless of whether that entity was a party when the loan was first procured, because “a party‘s rights to collect a loan is part of that sale and, therefore, ‘in con
The loan modification negotiations, however, were not “in connection with” the sale of this loan because that was not a service the lender agreed to sell or the borrower agreed to buy when the parties agreed to the loan. For the purposes of the MMPA, a loan is a bundle of services. Even though the sale of the loan continues until those services are completed, the extent of those services—the rights and obligations of the parties with respect to the loan—is fixed at the outset when the parties agree to the terms of the loan. The deed of trust executed in the original transaction specifically stated that there was no obligation to engage in renegotiations. In engaging in loan modification negotiations, Wells Fargo was not enforcing the terms of the loan but rather contemplating creating a new agreement. Its actions were not “in connection with” the sale of the original loan.
Watson further argues that an obligation to act in good faith arises at the time of the transaction. Watson contends that since a seller‘s breach of this duty will often not occur until long after the terms of a sale are finalized, the loan modification negotiations were “in connection with” the original transaction. For support, she relies on Ward v. West County Motor Co., Inc., 403 S.W.3d 82 (Mo. banc 2013). In Ward, the defendant filed a motion to dismiss the plaintiffs’ MMPA claims, which alleged in relevant part that the defendant acted in bad faith in telling the plaintiffs that deposits they paid were refundable when they were, in fact, nonrefundable. Id. at 83-84. Relying on
Watson‘s reliance on Ward is misplaced. While a lack of good faith may give rise to a MMPA claim, Ward is inapposite in this case because Watson does not argue that Wells Fargo was enforcing the terms of the initial loan in bad faith. Rather, she argues that Wells Fargo engaged in loan modification negotiations in bad faith. As noted above, the loan modification negotiations were not related to the enforcement of the original loan terms, so a lack of good faith in the negotiations cannot be “in connection with” the sale of the original loan.
Conclusion
For the foregoing reasons, the trial court‘s judgment is affirmed in part and reversed in part, and the case is remanded.4
BRECKENRIDGE, FISCHER, and WILSON, JJ., concur; DRAPER, J., concurs in part and dissents in part in separate opinion filed; STITH and TEITELMAN, JJ., concur in opinion of DRAPER, J.
GEORGE W. DRAPER III, Judge.
I concur with the principal opinion‘s holding that summary judgment was not appropriate with respect to Watson‘s wrongful foreclosure allegations. I respectfully dissent however, from the prin
The purpose of the MMPA is the protection of consumers. Huch v. Charter Commc‘ns, Inc., 290 S.W.3d 721, 724 (Mo. banc 2009). The MMPA was enacted to “supplement the definitions of common law fraud in an attempt to preserve fundamental honesty, fair play and right dealings in public transactions.” Chochorowski v. Home Depot U.S.A., 404 S.W.3d 220, 226 (Mo. banc 2013). “The statute paint[s] in broad strokes to prevent evasion thereof due to overly meticulous definitions.” Schuchmann v. Air Servs. Heating & Air Conditioning, Inc., 199 S.W.3d 228, 233 (Mo.App. S.D.2006).
In Conway, the principal opinion finds that the phrase “in connection with” the sale means there must be a relationship between the sale of merchandise and the alleged unlawful action. Conway, 438 S.W.3d at 414. Specifically, the plaintiffs had to allege a relationship between the foreclosure actions and the original loan to prevail under the MMPA. Id. at 414-15. This Court held that, “[f]or the purposes of the MMPA, a loan is an agreed upon bundle of services being ‘sold’ by the lender to the borrower, and the ‘sale’ of the loan lasts until the last service is performed or the loan is repaid.” Id. at 412 (Emphasis added). “As long as the plaintiff alleges that the misconduct occurred in connection with the services that comprise the ‘sale’ of a loan, the actor can be liable under the MMPA.” Id.
The principal opinion found Conway did not apply in Watson‘s case because the bad faith negotiations Wells Fargo engaged in were not pursuant to the terms of the loan because the deed of trust specifically stated there was no obligation to engage in renegotiations of the financing terms. The principal opinion found Wells Fargo was not enforcing the original terms of the loan, but rather was contemplating a new agreement. Therefore, the principal opinion reasons Wells Fargo‘s actions were not “in connection with” the original sale of the mortgage loan.
While the terms of the original mortgage loan did not contain an obligation to renegotiate the financing terms, Wells Fargo chose to do so as part of its “bundle
Accordingly, I believe the circuit court erred in entering summary judgment in Wells Fargo‘s favor on Watson‘s loan modification allegations. I would reverse the circuit court‘s judgment and remand the case for further proceedings on all of the allegations raised in Watson‘s petition.