JOAN N. ERICKSEN, District Judge.
This case is before the Court on a Report and Recommendation issued on December 30, 2010, by the Honorable Arthur J. Boylan, Chief United States Magistrate Judge. The magistrate judge recommended granting summary judgment in favor of Defendants Countrywide Bank and Countrywide Home Loans (collectively Countrywide) and dismissing this action with prejudice. The Court has conducted a de novo review of the record. See D. Minn. LR 72.2(b). Based on that review, the Court adopts the Report and Recommendation [Docket No. 53]. Therefore, IT IS ORDERED THAT:
LET JUDGMENT BE ENTERED ACCORDINGLY.
ARTHUR J. BOYLAN, United States Chief Magistrate Judge.
This matter is before the Court, Chief Magistrate Judge Arthur J. Boylan, on Defendants' Motion to Summary Judgment [Docket No. 26]. These actions have been referred to the magistrate judge for report and recommendation to the district court under 28 U.S.C. § 636 and Local Rule 72.2(b). [Docket No. 43.] A hearing was held on the motion on November 19, 2010. Collin Myrlie appeared pro se. Mark Schroeder appeared on behalf of Defendants.
Based upon the record, memoranda, and oral arguments of the parties,
Many of the events in this case occurred during what has been called "the Great Recession" (i.e., the period of time from approximately December 2007 through June 2009).
The allegations in Plaintiff Collin Myrlie's Complaint can be summarized as follows: On May 19, 2005, Plaintiff purchased a property in Dakota County (hereinafter Dakota County property)
Plaintiff brought his Complaint in Dakota County District Court. On June 18, 2009, Defendants removed the case to federal court. [Docket No. 1.] On April 1, 2010, Defendants brought their Motion for Summary Judgment. This Court granted Plaintiffs request for a continuance of the hearing on Defendant's Motion for Summary Judgment. [Docket No. 51.] This Court directed Plaintiff to file his response on or before November 9, 2010. Plaintiff never filed any response to Defendant's Motion for Summary Judgment.
Defendants' motion is supported by the Affidavit of Mark G. Schroeder, which includes fifteen exhibits. The affidavit and its exhibits are the only factual record in the present case.
On May 19, 2004, Plaintiff entered into a construction loan, in the original principal amount of $575,000, with Cherokee State Bank to finance the construction of the Dakota County property. (Myrlie Tr. 101:18-104:6, Jan. 28, 2010; Aff. Schroeder Ex. B, Apr. 1, 2010.) In May 2005, construction of the Dakota County property was at or nearing completion, and as result, on May 24, 2005, Plaintiff entered into a loan modification agreement with Tradition Mortgage.
Beginning in late 2005, Plaintiff had difficulty making his mortgage payments. (Myrlie Tr. 120:18-121:18.) Plaintiff contacted Defendants to discuss "workout assistance." (Myrlie Tr. 119:16-120:15; Aff. Schroeder Ex. G.) In late December 2005, Defendants sent Plaintiff two letters requesting information in order to review Plaintiffs request for workout assistance. (Aff. Schroeder Ex. G.) By letter, dated December 30, 2005, Defendants informed Plaintiff that because it had not received the requested information from Plaintiff that his request for workout assistance was denied. (Aff. Schroeder Ex. G.)
Plaintiff continued to have difficulty making payments throughout 2006 and 2007. (Myrlie Tr. 124:23-25.) On January 17, 2006, Defendants sent Plaintiff a "Notice of Default and Acceleration," in which Defendants informed Plaintiff that his loan was "in serious default because the required payments ha[d] not been made." (Aff. Schroeder Ex. H.) The Notice directed Plaintiff to pay, $8,060.21 on or before February 16, 2006, or his mortgage payments
In April 2007, Defendants initiated foreclosure proceedings on the Dakota County property. (Aff. Schroeder Ex. I.) In June 2007, Plaintiff filed a Chapter 7 voluntary petition for bankruptcy. (Myrlie Tr. 127:13-22.) The bankruptcy proceedings had the operative effect of staying the foreclosure activities. Plaintiffs bankruptcy was discharged in February 2008. (Myrlie Tr. 127:23-128:9.)
But, as of March 2008, Defendants again notified Plaintiff that he was again "in serious default" and directing Plaintiff to pay $11,370.64 or his mortgage payments would be accelerated and foreclosure proceedings would be initiated. (Aff. Schroeder Ex. K.) The notice also stated as follows:
(Aff. Schroeder at Ex. K.) Plaintiff testified in his deposition that he understood that these options were not guaranteed and a person facing foreclosure would need to qualify for one of these options. (Myrlie Tr. 132:7-16.) Plaintiff testified at his deposition that based upon this Notice, he would not have been surprised if Defendant pursued foreclosure. (Id. at 130:16-23.) Shortly after this notice, Defendants, again, began foreclosure proceedings. (Id. at 132:17-20.) A sheriffs sale was ultimately held on November 25, 2008. (Id. at 134:2-7.) Plaintiff did not redeem the home during the six-month redemption period following the sheriffs sale. (Myrlie Tr. 135:1-21); see Minn.Stat. § 580.23 (permitting a mortgagor a six-month period
The record supports Plaintiffs allegations that sometime in 2008 he contacted Defendants and requested assistance due to the impending foreclosure. Plaintiff testified that on or about August 2008, Defendants agreed to a loan modification during a phone call. (Myrlie Tr. 137:3-138:1.) Plaintiffs recollection of the verbal agreement was that the outstanding amount owed would be incorporated within the principal balance and that the loan would be re-amortized. (Myrlie Tr. 141:8-142:7.) Plaintiff did not recall specific terms. (Myrlie Tr. 152:13-153:8.) Plaintiff testified that Defendants also told him that they would need to check with their investors and he understood that it was up the investors to decide whether or not to modify Plaintiffs loan. (Myrlie Tr. 146:2-147:9.) The record is not clear about the timeline of these communications, but it is clear that Defendants wrote to Plaintiff on October 30, 2008, and notified Plaintiff that his request for assistance was denied. (Aff. Schroeder at Ex. L.) Plaintiff testified in his deposition that he attempted to stop the sheriffs sale by calling Defendants and "giv[ing them] notice . . . that they verbally told [him] and agreed to do some sort of modification." (Myrlie Tr. 134:11-21.) Plaintiff also testified that he continued to contact Defendants until he filed the present lawsuit despite the fact he doubted that he would receive a loan modification and he had no other means of redeeming the home without a modification agreement. (Myrlie Tr. 148:14-152:4.)
Summary judgment is appropriate where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R.Civ.P. 56(c). The moving party has the initial responsibility of demonstrating that there is no genuine issue of material fact to be decided. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986). When a motion for summary judgment has been made and supported by the pleadings and affidavits, the burden shifts to the party opposing the motion to proffer evidence demonstrating that a trial is required because a disputed issue of material fact exists. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986).
"Promissory estoppel is an equitable doctrine that implies a contract in law where none exists in fact." Martens v. Minnesota Mining & Mfg. Co., 616 N.W.2d 732, 746 (Minn.2000) (quotation and citations omitted). "Promissory estoppel has three elements: (1) a clear and definite promise; (2) the promisor intended to induce reliance and such reliance occurred; and (3) the promise must be enforced to prevent injustice." Greuling v. Wells Fargo Home Mortgage, Inc., 690 N.W.2d 757, 761 (Minn.App.2005) (citing Olson v. Synergistic Techs. Bus. Sys., Inc., 628 N.W.2d 142, 152 (Minn.2001)).
Defendants contends that their Motion for Summary Judgment should be granted as to Plaintiffs promissory estoppel claim because his promissory estoppel claim is barred by (1) Plaintiffs failure to present evidence to raise a genuine issue of material fact as to his promissory estoppel claim, (2) a written contract covering the same subject matter, and (3) Minn.Stat. § 513.33. Because Plaintiff has failed to present evidence to create a genuine issue of material fact as to the elements of promissory estoppel and Plaintiffs claim is barred by the Minn.Stat. § 513.33, this Court recommends that Defendants' motion be granted as to Plaintiffs promissory estoppel claim.
The first element of promissory estoppel requires proof of a "clear and definite" promise. Ruud v. Great Plains Supply, Inc., 526 N.W.2d 369, 372 (Minn.1995). Plaintiff has offered neither allegations nor evidence to support that Defendants made a clear and definite promise to modify Plaintiffs mortgage. Plaintiffs recollection of the verbal agreement amounts to little more than the recitation of the general nature of a loan modification agreement (i.e., the outstanding balance is incorporated within a modified principle and the amortization schedule is amended). (See Myrlie Tr. 141:8-142:7.) Furthermore, Plaintiff cannot recall any specific terms of the loan modification agreement. (See id. at 152:13-153:8.) Therefore, Plaintiff has failed to raise a genuine issue of material fact with respect to the first element of promissory estoppel.
The second element of promissory estoppel requires proof of the defendant's intent to induce reliance and proof that the plaintiff relied on defendant's inducement to the plaintiffs detriment. Ruud, 526 N.W.2d at 372. Plaintiff has offered neither allegations nor evidence to support that Defendants intended to induce Plaintiffs reliance or did in fact induce Plaintiffs reliance.
The final element of promissory estoppel requires the Court to find as a matter of law that justice requires enforcing the promise. There is no injustice in not enforcing the alleged loan modification agreement in the present case. In an arm's length agreement, there is no injustice in denying a debtor's request to modify a credit agreement to terms more favorable to the debtor and less favorable to the creditor. At no time since March 2008 through the present has Plaintiff demonstrated any ability to meet the obligations of any loan agreement. If Plaintiff had any capacity to obtain financing or make payments on the loan, he would have demonstrated the ability to do so during the redemption period. Furthermore, enforcing the alleged promise in this action would run contrary to Minn.Stat. § 513.33, which was enacted to "protect lenders from having to litigate claims of oral promises." Rural American Bank of Greenwald v. Herickhoff, 485 N.W.2d 702, 705 (Minn.1992) (specifying that the Act was originally enacted to address litigation issues in agricultural loans).
Therefore, Defendants are entitled to summary judgment on the ground that Plaintiff has failed to raise a genuine issue of material fact to support his claim of promissory estoppel.
"[A]n express contract covering the same subject matter will preclude the application of promissory estoppel." Greuling, 690 N.W.2d at 761; see also Banbury v. Omnitrition Intern., Inc., 533 N.W.2d 876, 880-81 (Minn.App.1995). In the present case, a mortgage agreement existed between the parties. Defendants
Minn. Stat. § 513.33, subd. 1, defines "credit agreement" as "an agreement to lend or forbear repayment of money, goods, or things in action, to otherwise extend credit, or to make any other financial accommodation." Subdivision 2 states that "[a] debtor may not maintain an action on a credit agreement unless the agreement is in writing, expresses consideration, sets forth the relevant terms and conditions, and is signed by the creditor and the debtor." Minn.Stat. § 513.33, subd. 3(a), further states:
(Emphasis added.) Furthermore, a credit agreement can never be implied from a relationship between a creditor and a debtor. Id. at subd. 3(b).
The Minnesota Court of Appeals held in Greuling v. Wells Fargo Home Mortgage that "claims on agreements falling under section 513.33 fail as a matter of law if the agreement is not in writing." 690 N.W.2d at 761-62. In Greuling, the creditor asserted that he was induced to purchase a home on unfavorable terms by a promise made by his bank's agent that the bank would refinance the entire transaction immediately after closing. Id. at 759. After foreclosure, the creditor brought a claim for promissory estoppel and the district court granted the bank's motion for summary judgment. Id. The Minnesota Court of Appeals held that the creditor was "asserting an agreement to enter into a new credit agreement." Id. at 762. The Minnesota Court of Appeals held that
Id. at 762.
The same conclusion is warranted here: The parties' mortgage agreement constitutes a credit agreement as defined
Plaintiffs negligence claim is without merit. The elements of a claim for negligence are (1) duty; (2) breach of duty; (3) causation; and (4) damages. Schweich v. Ziegler, Inc., 463 N.W.2d 722, 729 (Minn.1990). In Plaintiffs Complaint, his negligence cause of action merely recites the elements of negligence without offering any factual explanation as to what Defendants did that was tortious. Defendant's Motion for Summary Judgment should be granted as to Plaintiffs negligence claim for the following reasons.
First, Plaintiffs negligence seems to assert a negligent breach of contract theory. Plaintiff seems to contend that Defendants negligently failed to follow through on their promise to enter into a loan modification agreement and thereby breached their agreement to modify Plaintiffs loan. This is not a claim upon which relief can be granted because negligent breach of contract is not a cause of action in Minnesota. Lampert Lumber Co. v. Joyce, 405 N.W.2d 423, 424 (Minn.1987).
Second, Plaintiff has neither identified nor offered any argument as to what duty Defendants owed to Plaintiff in connection with the loan modification agreement. "Existence of a duty in a negligence case is a question of law." Funchess v. Cecil Newman Corp., 632 N.W.2d 666, 672 (Minn.2001). As a matter of law Defendants owed Plaintiff no special duties. See Hurley v. TCF Banking & Sav., F.A., 414 N.W.2d 584, 587 (Minn. App.1987) (stating that "a bank is not in a fiduciary relationship with a customer, rather the relationship is one of debtor and creditor"). Furthermore, Plaintiff acknowledged in his deposition that the loan modification was discretionary and subject to the approval of those who invested in the loan.
Third, Plaintiff has neither alleged nor offered any evidence to show that Defendants' actions proximately caused Plaintiffs damages. The foreclosure was permitted by the parties' loan agreement. The foreclosure was caused by Plaintiffs inability to make payments pursuant to the loan agreement. The loan modification was a way to avoid foreclosure. Thus, the absence of a loan modification agreement is not a cause of foreclosure.
Fourth, Plaintiff has presented no evidence to support his contention that he suffered damages. Plaintiff has continued to live in the home without making any mortgage payments, which negates his claim to having suffered increased costs. Plaintiff also testified that the Dakota County property is worth less than what he owes, which negates his claim to lost profits. Plaintiffs loss of remedies theory is nebulous and there has been no showing
Therefore, for all of these reasons, Defendants are entitled to summary judgment on Plaintiffs claim of negligence.
Plaintiff acknowledged in his deposition that he should not have pleaded punitive damages in his Complaint. (See Myrle Tr. 166:10-18.) Pleading punitive damages in an initial complaint is barred by Minn.Stat. § 549.191. Therefore, this Court recommends that Defendant's Motion for Summary Judgment be granted with respect to the issue of punitive damages.
Based upon the record, memoranda, and oral arguments of the parties,
