JAMES P. SMITH, Bankruptcy Judge.
Before the Court is Defendants' (collectively "Wells Fargo") motion for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c), made applicable to this adversary proceeding by Federal Rule of Bankruptcy Procedure 7012. The motion came on for hearing on March 30, 2011. After considering the pleadings, the briefs and the arguments of the parties, the Court issues these findings of fact and conclusions of law pursuant to Federal Rule of Bankruptcy Procedure 7052. As explained below, the motion is granted in part and denied in part.
In their complaint, Debtors James P. Salvador, Jr. and Debra A. Salvador allege that in March 2006, they refinanced their then-existing fixed-rate home loan with Countrywide Home Loans by obtaining an adjustable-rate home loan from Wells Fargo (the "Loan"). Debtors allege that Wells Fargo made the Loan as a set up for a "flipping transaction" to refinance it within a short time period. Debtors allege that they suffered a cash flow problem in November 2009, as a result of the bad economy and the ever increasing monthly payments to service the Loan. In December 2009, Debtors alleged they negotiated an agreement with Wells Fargo to modify the Loan payments in an attempt to avoid default. Debtors and Wells Fargo entered into an agreement under the federally funded Home Affordable Modification Program (HAMP), whereby Debtors' mortgage payments for a "trial period" were reduced from some $2,100 to $1,147 per month as a part of a Trial Period Plan ("TPP"). Debtors made the TPP payments from December 2009, until September 2010, during which Debtors, on multiple occasions, provided financial statements to Wells Fargo to verify Debtors' qualifications under the modification program. On or about September 30, 2010, Wells Fargo placed Debtors on notice of default and that Wells Fargo would not accept any more payments. Wells Fargo demanded full payment of the arrears in order to reinstate the Loan. In October 2010, Wells Fargo initiated foreclosure proceedings with a scheduled foreclosure date of November 2, 2010.
Debtors filed their Chapter 13 case on October 26, 2010. Thereafter, Debtors filed their complaint in this adversary proceeding.
Federal Rule of Civil Procedure 12(c) provides:
The Eleventh Circuit has explained that:
Mergens v. Dreyfoos, 166 F.3d 1114, 1117 (11th Cir.), cert. denied 528 U.S. 820, 120 S.Ct. 63, 145 L.Ed.2d 55 (1999). (internal citations omitted).
Federal Rule of Civil Procedure 12(d) provides:
However, in Financial Security Assurance, Inc. v. Stephens, Inc., 500 F.3d 1276, 1284 (11th Cir.2007), the Eleventh Circuit held:
The Loan between Debtors and Wells Fargo is central to Debtors' complaint and is referenced numerous times therein. Further, Counts II and III of Debtors' complaint allege causes of action for breach of the Trial Period Plan Agreement ("TPP Agreement"). While none of the documents evidencing the Loan or the TPP Agreement were attached to Debtors' complaint, Wells Fargo attached to its motion
In Count I, Debtors seek damages and other relief from Wells Fargo for its alleged violation of the Georgia Fair Lending Act ("GAFLA") (O.C.G.A. §§ 7-6A-1 et seq.)
Wells Fargo, a national charted bank, contends that federal law preempts GAFLA. Wells Fargo relies upon a Preemption Determination and Order published in the Federal Register, which was issued on August 5, 2003, by the Office of the Comptroller of the Currency ("OCC"), an agency within the United States Department of the Treasury.
Title 12 of the United States Code provides that, after proper notice and an opportunity for comments, the OCC may issue and publish in the Federal Register an opinion letter or interpretive rule that concludes that federal law preempts the application to a national bank any state statute regarding, in part, consumer protection or fair lending. 12 U.S.C. §§ 43(a), (b), 1813(q)(1).
In Wachovia Bank v. Burke, 414 F.3d 305 (2nd Cir.2005) cert. denied 550 U.S. 913, 127 S.Ct. 2093, 167 L.Ed.2d 830 (2007), a national charted bank and its operating subsidiary contended that the
Id. at 312. (citations omitted)
Id. at 314. (citations omitted)
In its order issued on August 5, 2003, the OCC concluded that the provisions of GAFLA
The OCC published a Final Rule on January 13, 2004, amending 12 CFR Parts 7 and 34 to specify the types of state laws that do and do not apply to national banks' lending and deposit taking actions. 69 Fed.Reg. 1904-01 (Jan. 13, 2004). The Final Rule cites the OCC's GAFLA August 5, 2003 order three times, but did not change or overrule that order. 69 Fed. Reg. at 1908, 1911 n. 57, 1912 n. 59.
In their response to Wells Fargo's motion, Debtors contend that at least some of the relief sought in Count I, including equitable relief barring foreclosure, was not preempted. (Complaint para. 80).
The OCC's order clearly stated that the types of violations of GAFLA asserted by Debtors in Count I were either preempted by federal law or were moot as a result of the preemption. In an Interpretive Letter dated April 2, 2004, in response to a request from the Commissioner of the Georgia Department of Banking and Finance as to which sections of GAFLA were or were not preempted, the OCC stated that its order issued on August 5, 2003, did not preempt sections 7-6A-5(13)(B) (requiring lender to terminate foreclosure proceeding if default is cured) and 7-6A-7(f) (mortgage broker liability). However, the OCC stated that the sections upon which Debtors rely for damages and recision, sections 7-6A-6(c) and 7-6A-7(a)-(e) and (g)-(i), did not apply to national banks because these sections were moot since the underlying
Thus, all of Debtors' claims under GAFLA asserted in Count I are preempted by federal law. Accordingly, Wells Fargo's motion for judgment on the pleadings as to Count I is granted.
In Count II, Debtors allege that on March 10, 2006, they entered into the Loan with Wells Fargo, as evidenced by an Adjustable Rate Note, pursuant to which Debtors agreed to pay Wells Fargo $340,000 plus interest through monthly installments to begin May 1, 2006. (Complaint para. 28, Exhibit "A" to Wells Fargo brief). On December 7, 2009, Debtors signed the TPP Agreement pursuant to which they sought modification of the Loan. (Complaint paras. 64, 65, Exhibit "D" to Wells Fargo brief).
Debtors contend that they made all the payments required under the TPP Agreement and that they made additional payments as well. (Complaint para. 67). They further contend that they fully complied with Wells Fargo's demands in order to complete the modification process. (Complaint para. 69). Nevertheless, Wells Fargo gave notice of default, demanded a full cure of all defaults under the Loan and began foreclosure proceedings for a foreclosure to take place on November 2, 2010. (Complaint paras. 70, 71).
Debtors allege that the TTP Agreement "constitutes a valid contract". (Complaint para. 82). Debtors contend that Wells Fargo breached this contract by, inter alia, failing to offer permanent modification of the Loan and by proceeding with foreclosure. (Complaint paras. 90-91).
To bring a breach of contract claim, the plaintiff has the burden of first proving a valid and enforceable contract. Thus:
Broughton v. Johnson, 247 Ga.App. 819, 545 S.E.2d 370, 371 (2001).
O.C.G.A. § 13-3-2 provides:
As explained by the court in TranSouth Financial Corp. v. Rooks, 269 Ga.App. 321, 324, 604 S.E.2d 562, 564-65 (2004):
Thus, where there has been no agreement as to all the essential terms, and the contract is unenforceable for lack of certainty, the breach of contract claim fails. Moore v. BellSouth Mobility, Inc., 243 Ga.App. 674, 676, 534 S.E.2d 133, 135-36 (2000).
The TPP Agreement provides, in pertinent part:
Section 2 of the TPP Agreement (Exhibit "D" to Wells Fargo brief) required Debtors to pay Wells Fargo $1,147 on January 1, February 1, and March 1, 2010. These "Trial Period Payments" were "an estimate of the payment that will be required under the modified loan terms, which will be finalized in accordance with Section 3. . . ." The TPP Agreement further provided:
It is clear from the terms of the TPP Agreement that the document is nothing more than an agreement to negotiate further with respect to the terms of a proposed loan modification. The parties did not reach an agreement on all essential terms concerning the proposed loan modification. The TPP Agreement, by its terms, recognizes that the new payment amount under the loan modification had not been determined. Nor is there any agreement with respect to the interest rate to be charged under the modified loan or whether the maturity date of the Loan would be changed. Thus, it is clear that the parties did not agree to all of the essential term of a contract by entering into the TPP Agreement. See Reuben v. First National Bank of Atlanta, 146 Ga.App. 864, 866, 247 S.E.2d 504, 507 (1978) (promise to make a loan with no agreement as to interest rate or maturity date is not enforceable).
This case is similar to the case of Hartrampf v. Citizens & Southern Realty Investors, 157 Ga.App. 879, 278 S.E.2d 750 (1981). In that case, Citizens & Southern foreclosed on real property securing a note from Hartrampf upon default of the note and thereafter filed suit for the deficiency balance remaining after the sale of the property. Hartrampf answered and counterclaimed. In his counterclaim, he asserted that Citizens & Southern refused to honor its agreement to extend a second loan commitment. The court found that the purported commitment was nothing more than an agreement to agree in the future. The court found that the agreement contemplated future negotiations between the parties at an unspecified future date for a loan of an unspecified amount and unspecified maturity. The court held:
157 Ga.App. at 881, 278 S.E.2d at 752.
This conclusion is consistent with the decisions of other courts around the country which have considered breach of contract claims relating to the failure of a lender to provide permanent loan modification pursuant to a TPP agreement. As
The courts in Lonberg, Grill, Prasad, Jackson and Brown all held that the language of the TPP agreements made clear that no binding contract existed until an actual modification agreement was signed. The language in the TPP Agreement at issue in this case is identical and the Court agrees with the reasoning of those cases.
Contrary to paragraph 82 of their complaint in which Debtors contend that the "TPP Agreement with Wells Fargo circa December 2009 constitutes a valid contract", Debtors contend in their brief that the TPP Agreement does not represent the entire contract between the parties. They contend that the Court must also consider the letter from Wells Fargo pursuant to which the TPP Agreement document was offered to Debtors. A purported copy of this letter was attached to their brief filed in response to Wells Fargo's motion to stay discovery pending a decision on the motion for judgment on the pleadings. It is unclear whether the exception to Rule 12(d) recognized by the court in Financial Security Assurance, supra, would apply to the letter which Debtors seek this Court to consider. Wells Fargo has not acknowledged the authenticity of this letter. Further, the letter was not submitted with any brief or motion filed in the judgment on the pleadings proceedings, although the letter was submitted in a brief filed in discovery proceedings related to the motion. Nevertheless, it is not necessary for the Court to decide this issue. A review of that letter makes it clear that it contains none of the essential contractual terms which this Court has found missing in the TPP Agreement. Thus, even if the Court were to consider the letter as part the contract between the parties, the contract claim would still fail.
Debtors also contend in Count II that Wells Fargo breached the implied duty of good faith and fair dealing with respect to the TPP Agreement. (Compliant paras. 92-98.) However, the covenant of good faith and fair dealing is not an independent contract, nor does it provide an independent cause of action. Rather, the covenant modifies and becomes part of the underlying contract. Thus, if there is no breach of the underlying contract, there is no cause of action for breach of the covenant of good faith and fair dealing. Stuart Enterprises International, Inc. v.
In summary, with respect to Count II, even assuming all of the facts asserted by Debtors in their complaint are true, the alleged contract between the parties (the TPP Agreement) is unenforceable. Accordingly, Wells Fargo is entitled to judgment on the pleadings on Count II.
In Count III, Debtors assert a promissory estoppel claim alleging that they are entitled to damages because they relied on Wells Fargo's promise to provide a permanent loan modification, that they acted to their detriment and that such reliance was reasonable. (Complaint paras. 99-105).
As recognized by the court in Georgia Inv. Int'l, Inc. v. Branch Banking and Trust Co., 305 Ga.App. 673, 675, 700 S.E.2d 662, 664 (2010):
In Georgia Investments, the maker of the note and the guarantor sought to defend against enforcement of the note on the grounds that the bank had promised to renew the loan and to provide a new line of credit. However, the court found that "the promise was vague and indefinite as to other material terms, particularly the interest rate." 305 Ga.App. at 676, 700 S.E.2d. at 664. Accordingly, the court held that the promise was too vague to support a promissory estoppel claim. Likewise, in the case of Reuben v. First National Bank of Atlanta, supra, the court held that promissory estoppel was not available where a promise to make a loan did not include an agreement with respect to the interest rate or maturity date. 146 Ga.App. at 866, 247 S.E.2d. at 507. Accord Locke v. Wells Fargo Home Mortgage, 2010 WL 4941456 at *4 (S.D.Fl., Nov. 30, 2010); Barinaga v. J P Morgan Chase & Co., 2010 WL 4338326 at * 14-15 (D.Or., Oct. 26, 2010).
As explained in Part 4 above, the alleged contract between the parties fails because it is too vague and lacks essential terms. Likewise, the alleged promise to provide a loan modification was too vague to support a promissory estoppel claim. Accordingly, Wells Fargo is entitled to judgment on the pleadings on Count III.
In Count IV, Debtors allege that Wells Fargo, as a participant in HAMP, executed a Service Participation Agreement ("SPA") with the federal government. (Complaint paras. 46-48). Debtors contend that under the SPA, Wells Fargo is required to evaluate loans to determine if a loan modification is appropriate. (Complaint paras. 50-55). Debtors contend that they are third party beneficiaries of the SPA between Wells Fargo and the federal government and that Wells Fargo breached the SPA by wrongfully denying Debtors a permanent loan modification. (Complaint paras. 110-111).
As far as this Court has been able to determine, no court in the country has accepted a third-party beneficiary claim relating to HAMP. The courts have unanimously held that borrowers are not intended beneficiaries, but merely incidental beneficiaries to the contract between loan servicers and the government under the HAMP program. The courts have pointed out that the HAMP program does not require lenders to modify loans, but merely to consider modification. Accordingly, since the government cannot force a lender to modify a loan under the HAMP program, a borrower has no right to enforce such a modification. See Sena v. Bank of America Home Loans, 2011 WL 1204333 at *2-3 (D.Nev., March 29, 2011); Villa v. Wells Fargo Bank, N.A., 2010 WL 935680 at *2-3 (S.D.Cal. March 2010); Escobedo v. Countrywide, 2009 WL 4981618 at *3 (S.D.Cal. Dec. 15, 2009). See also Zoher v. Chase Home Financing, 2010 WL 4064798 at *4 (S.D.Fl., Oct. 15, 2010); Marks v. Bank of America, N.A., 2010 WL 2572988 at *3-5 (D.Az., June 22, 2010). Because Debtors are merely incidental beneficiaries of, and do not have enforceable rights under the HAMP program and SPA, Debtors lack standing to sue as third party beneficiaries. Accordingly, Wells Fargo's motion for judgment on the pleading with respect to Count IV is granted.
In Count V, Debtors contend that Wells Fargo failed to provide various disclosures when the Loan was closed as required by RESPA, 12 U.S.C. §§ 2603, 2605, 2607 and 2608 and the regulations promulgated thereunder. Each of these sections will be discussed separately.
While 12 U.S.C. § 2614 provides for jurisdiction in the district courts and statutes of limitation for actions under sections § 2605, 2607 and 2608, the statute is silent as to actions under section 2603. Thus, many courts have held that there is no private right of action for violations of section 2603. See, e.g. Fogle v. Wilmington Finance, 2011 WL 320572 at *7 (D.N.H., Jan. 31, 2011). Although the Eleventh Circuit has not addressed this issue, the court has held that there is no private cause of action under section 2604. The court noted that while other provisions of RESPA explicitly provide for private civil remedies, section 2604 does not, indicating that Congress did not intend to create a private cause of action. Collins v. FMHA-USDA, 105 F.3d 1366, 1368 (11th Cir.). cert. denied 521 U.S. 1127, 117 S.Ct. 2528, 138 L.Ed.2d 1028 (1997).
Likewise, section 2603 does not explicitly provide for private civil remedies. Further, section 2614 does not mention actions under section 2603. This leads to the conclusion that Congress did not intend to provide a private case of action for violations of section 2603.
As for the failure to make disclosures under sections 2605, 2607, and 2608, there is a three year statute of limitations for actions under section 2605 and a one year statute of limitations for actions under sections 2607 and 2608. 12 U.S.C. § 2614. The Loan was closed on March 10, 2006. (Complaint para. 28). The complaint was
Debtors also contend that on or about September 13, 2010, they sent Wells Fargo a qualified written request under section 2605, requesting certain items of information regarding the Loan, servicing of the Loan, and information regarding Wells Fargo's alleged failure to properly consider Debtor's loan modification. (Complaint para. 126). Debtors contend that Wells Fargo has failed to provide some of the information requested.
Section 2605(e) requires loan servicers to respond to "qualified written requests from the borrower . . . for information relating to the servicing of such loan." 12 U.S.C. § 2605(e)(1)(A) (emphasis supplied). The term "servicing" is defined in 24 CFR § 3500.2 as:
12 U.S.C. § 2605(f) provides a private cause of action to Debtors for any violations of § 2605. If Debtors can prove that Wells Fargo violated section 2605, Debtors are entitled to recover damages under section 2605(f)(1).
Although Debtors did not attach copies of their September 13, 2010, request or Wells Fargo's responses thereto, Debtors described the nature of their request in paragraph 126 of their complaint. Wells Fargo has admitted receiving the letter (Answer para. 139), but denies that it failed to properly respond. (Answer para. 141). Thus, as for the requests for information relating to the "servicing of the loan" as described by Debtors in paragraph 126(a) through (g) of their complaint, the facts are in dispute and, based on the pleadings, Wells Fargo is not entitled to judgment as a matter of law and its motion is denied.
On the other hand, much of the information which Debtors sought relates to their allegations that Wells Fargo failed to provide them with a permanent loan modification under the HAMP program. (See, for instance, Complaint paras. 126(h), 130-137 and 140). This information is outside the scope of the term "servicing" as defined in 24 CFR § 3500.2. Cf. Williams v. Wells Fargo Bank, N.A., Inc., 2010 WL 1463521 at *3 (N.D.Cal. April 13, 2010) (a request for documents relating to borrowers' options for loan modification, short sale, or bankruptcy was not a request for information relating to the servicing of the loan); MorEquity, Inc. v. Naeem, 118 F.Supp.2d 885, 901 (N.D.Ill.2000) (a request for information relating to validity of loan documents was not a request for information relating to servicing of the loan). Since Wells Fargo was not required to provide such information, a failure to respond to this type of request would not be a violation of 12 U.S.C. § 2605. Accordingly, to the extent that Debtors' RESPA claim relates to a request for information relating to the failed attempt to modify the Loan under HAMP, Wells Fargo is entitled to judgment on the pleadings and its motion is granted.
Debtors also assert claims under 12 U.S.C. § 2609, contending that Wells Fargo failed to properly perform escrow analysis with respect to the Loan. However,
Wells Fargo also challenges Debtors' request for damages under section 2605(f)(1)(B) for Wells Fargo's alleged "pattern or practice of noncompliance". (Complaint Count V paras. 148-149). Section 2605(f)(1)(B) allows a court to award "any additional damages, as the court may allow, in the case of a pattern or practice of noncompliance with the requirements of this section, in an amount not to exceed $1,000." As held by the court in McLean v. GMAC Mortg. Corp., 595 F.Supp. 2nd 1360, 1365 (S.D.Fla.2009), affd. 398 Fed. Appx. 467 (11th Cir.2010):
According to Debtors' complaint, Wells Fargo failed to respond to only one valid qualified written request. (Complaint paras. 126-128).
Further, on the issue of actual damages, section 2605(f)(1)(A) allows an individual to recover "any actual damages to the borrower as a result of the failure" to respond to a qualified written request. (emphasis supplied).
In re Tomasevic, 273 B.R. 682, 687 (Bankr. M.D.Fla.2002). See also Turner v. Beneficial Corp., 242 F.3d 1023, 1027-28 (11th Cir.) (en banc) cert. denied 534 U.S. 820, 122 S.Ct. 51, 151 L.Ed.2d 21 (2001) (requiring a casual link for TILA claims).
Debtors' complaint alleges that they have incurred actual damages including foregoing:
Complaint paras. 104-105. Debtors also contend that they have incurred damages for:
Complaint para. 147.
Debtors have the burden of proving that these damages were proximately caused by Wells Fargo's failure to respond to a valid qualified written request (QWR). They would not be entitled to any of the alleged damages to the extent that they flowed from the failed attempt to obtain a permanent loan modification or from their actual default under the Loan.
Based on the pleadings, the Court is unable to determine what, if any, of these damages arose as a result of Wells Fargo's alleged failure to respond to a valid qualified written request. Accordingly, Wells Fargo is not entitled to judgement on the pleadings with respect to the issue of damages under section 2605(b)(1)(A).
In summary, Wells Fargo's motion for judgment on the pleadings is granted with respect to Debtors' Count V RESPA claim under section 2603, the claim under sections 2605, 2607 and 2608 for failure to make disclosures at the time the Loan was closed in March, 2006, the claim under section 2605 for failure to respond to requests for information relating to Debtors' failed attempt to modify the Loan under HAMP, the claim under section 2609 and the claim for "additional damages" under section 2605(f)(1)(B). The motion for judgment on the pleadings is denied with respect to Debtors' claim under section 2605 for damages arising from Wells Fargo's alleged failure to respond to a valid
In Count VI, Debtors allege that Wells Fargo violated the Georgia Uniform Deceptive Trade Practices Act ("UDTPA") O.C.G.A. §§ 10-1-370 et seq. Debtors allege the violation was a result of Wells Fargo's non-disclosures, inaccurate disclosures and conduct that collectively violated GAFLA, HAMP, and/or breach of the covenant of good faith and fair dealings. (Complaint paras. 146-148.). Debtors seek equitable injunctive relief, relief from the requirement of making tender, general and exemplary damages, and costs and attorney fees.
The Court has previously determined that Wells Fargo is entitled to judgment on the pleadings as to Debtors' claims under GAFLA, breach of contract, and breach of good faith and fair dealing. Although Debtors mention HAMP throughout their complaint, no specific claim under HAMP has been made. Indeed, such a claim would fail as there is no private cause of action under HAMP. See e.g. Marks v. Bank of America, supra at *5. Since Debtors' allegations of UDTPA violations were based upon the aforesaid alleged violations, Debtors' UDTPA claim must also fail. Accordingly, Wells Fargo is entitled to judgment on the pleadings on Count VI.
In Count VII, Debtors allege that Wells Fargo violated the Georgia Fair Business Practices Act of 1975 ("FBPA") O.C.G.A. §§ 10-1-390 et seq. Debtors allege the violation was a result of non-disclosures and inaccurate disclosures in violation of GAFLA, HAMP, and breach of the covenant of good faith and fair dealing. (Complaint para. 154). Debtors seek equitable injunctive relief, relief from the requirement of making tender, general and exemplary damages, costs and attorney fees. Debtors also assert their FBPA claim as a defense to Wells Fargo's action to enforce Debtors' obligations. O.C.G.A. § 10-1-401(b).
Because mortgage transactions are regulated by TILA, RESPA and the Georgia Residential Mortgage Act, the FBPA does not apply to residential mortgage transactions.
Wells Fargo's motion for judgment on the pleadings is granted with respect to Counts I, II, III, IV, VI and VII. As explained in Part 7 above, as to Count V, the motion is granted in part and denied in part. A separate order will be entered consistence with this decision.
