Dixon v. Wells Fargo Bank, N.A.

Decision Date22 July 2011
Docket NumberCivil Action No. 11–10368–WGY.
Citation798 F.Supp.2d 336
PartiesFrank T. DIXON; Deana M. Dixon, Plaintiffs, v. WELLS FARGO BANK, N.A. formerly known as Wachovia Mortgage, FSB formerly known as World Savings Bank, FSB, Defendant.
CourtU.S. District Court — District of Massachusetts

OPINION TEXT STARTS HERE

David M. Bizar, Seyfarth Shaw, Boston, MA, for Defendants.

Gerald A. Phelps, Law Office of Gerald A. Phelps, Halifax, MA, for Plaintiff.

MEMORANDUM AND ORDER

YOUNG, District Judge.I. INTRODUCTION

Frank and Deana Dixon (collectively the Dixons) bring this cause of action against Wells Fargo Bank, N.A. (Wells Fargo), seeking (1) an injunction prohibiting Wells Fargo from foreclosing on their home; (2) specific performance of an oral agreement to enter into a loan modification; and (3) damages. Wells Fargo, having removed the action from state court, now moves for dismissal of the Dixons' complaint under Fed.R.Civ.P. 12(b)(6), arguing that the allegations are insufficient to invoke the doctrine of promissory estoppel and that, to the extent the Dixons have stated a state-law claim, it is preempted by the Home Owners' Loan Act (“HOLA”), 12 U.S.C. §§ 1461–1700, and its implementing regulations, 12 C.F.R. §§ 500–99.

A. Procedural History

On January 6, 2011, the Dixons initiated this civil action in the Massachusetts Superior Court sitting in and for the County of Plymouth, Civil Docket No. PLCV2011–00015, by filing a “Verified Complaint for Injunctive Relief, Specific Performance and Damages.” Compl., Ex. A, ECF No. 1–1; Summons & Order Notice, Ex. D, ECF No. 1–4. They also filed an ex parte motion for a temporary restraining order. TRO, Ex. B, ECF No. 1–2. After an initial continuance, the hearing on that motion was held on February 14, 2011, and the Superior Court issued a preliminary injunction, enjoining Wells Fargo from prosecuting the foreclosure action it had filed against the Dixons until further order of the court. Sup. Ct. Civ. Dkt. 3–4, Ex. C, ECF No. 1–3; Order Prelim. Inj., ECF No. 4. At the present time, the preliminary injunction remains in effect. Mem. Opp'n Pls.' Mot. Remand 1, ECF No. 13.

On March 4, 2011, Wells Fargo removed the action to the United States District Court for the District of Massachusetts. Notice Removal, ECF No. 1. Wells Fargo filed its motion to dismiss the Dixons' complaint on April 11, 2011. Def.'s Mot. Dismiss, ECF No. 5; Mem. Supp. Def.'s Mot. Dismiss (“Def.'s Mem. Supp.”), ECF No. 7. The Dixons opposed Wells Fargo's motion and moved to remand the case. Mem. Opp'n Def.'s Mot. Dismiss (“Pls.' Mem. Opp'n”), ECF No. 12; Pls.' Mot. Remand, ECF No. 9; Mem. Supp. Pls.' Mot. Remand, ECF No. 10.

After a hearing on May 9, 2011, this Court denied the Dixons' motion to remand and granted Wells Fargo's motion to dismiss the Dixons' contract claim as insufficiently pleaded. The Court took under advisement the two remaining issues: (1) the sufficiency of the allegations in the complaint with respect to the doctrine of promissory estoppel; and (2) HOLA preemption. With leave of the Court, both parties have since filed supplemental briefing. Supplemental Mem. Supp. Def.'s Mot. Dismiss (“Def.'s Supplemental Mem. Supp.”), ECF No. 16; Supplemental Mem. Opp'n Def.'s Mot. Dismiss (“Pls.' Supplemental Mem. Opp'n”), ECF No. 18.

B. Facts Alleged

The Dixons reside at their home in Scituate, Plymouth County, Massachusetts. Compl. ¶ 2. Wells Fargo is a corporation doing business in the Commonwealth of Massachusetts. Id. ¶ 3. Wells Fargo alleges that it is the holder of a mortgage on the Dixons' home. Id. ¶ 6.

On or about June 8, 2009, the Dixons orally agreed with Wells Fargo to take the steps necessary to enter into a mortgage loan modification. Id. ¶ 7. As part of this agreement, Wells Fargo instructed the Dixons to stop making payments on their loan. Id. It was contemplated that the unpaid payments would be added to the note as modified. Id. In addition, Wells Fargo requested certain financial information, which the Dixons promptly supplied. Id.

Notwithstanding the Dixons' diligent efforts and reliance on Wells Fargo's promise, Wells Fargo has failed, and effectively refused, to abide by the oral agreement to modify the existing mortgage loan. Id. ¶ 8.

On or about December 8, 2010, the Dixons received notice from the Massachusetts Land Court that Wells Fargo was proceeding with a foreclosure on their home. Id. ¶ 9. The return date on the order of notice in the Land Court was January 10, 2011, and so the Dixons sought a temporary restraining order in the Superior Court to prevent the loss of their home. See Procedural History, supra.

The Dixons state that, on information and belief, the fair market value of their home is in excess of the mortgage loan balance and any arrearage. Compl. ¶ 10.

II. ANALYSIS

The Dixons seek to enforce Wells Fargo's alleged promise to engage in negotiating a loan modification. See Pls.' Supplemental Mem. Opp'n 1–2. Arguing that the bank's initiation of foreclosure proceedings without warning shows its promise to consider their eligibility for a modification was insincere, the Dixons ask not only that the foreclosure be halted but also that Wells Fargo be returned to its place at the bargaining table. See Id.; see also Pls.' Mem. Opp'n 7–8, 11–12. Wells Fargo contends that (1) any promise it made to consider the Dixons for a loan modification was not sufficiently definite as to be binding, see Def.'s Supplemental Mem. Supp. 1; (2) the Dixons' reliance on its promise was neither reasonable nor detrimental, see Def.'s Mem. Supp. at 17–19; and (3) in any event, the claim for promissory estoppel is preempted by federal law, see Id. at 8–14.

A. Legal Standard

To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). In addition to accepting all factual allegations in the complaint as true, the Court must draw all reasonable inferences in the plaintiff's favor. Langadinos v. American Airlines, Inc., 199 F.3d 68, 69 (1st Cir.2000). If the facts in the complaint are sufficient to state a cause of action, a motion to dismiss the complaint must be denied. See Nollet v. Justices of Trial Court of Mass., 83 F.Supp.2d 204, 208 (D.Mass.2000) (Harrington, J.).

Although the Court must accept as true all of the factual allegations contained in the complaint, that doctrine is not applicable to legal conclusions. Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). Threadbare recitals of the legal elements, supported by mere conclusory statements, do not suffice to state a cause of action. Id. Accordingly, a complaint does not state a claim for relief where the well-pleaded facts fail to warrant an inference of anything more than the mere possibility of misconduct. Id. at 1950.

B. Promissory Estoppel

The gravamen of the Dixons' complaint is that Wells Fargo promised to engage in negotiations to modify their loan, provided that they took certain “steps necessary to enter into a mortgage modification.” Compl. ¶ 7. On the basis of Wells Fargo's representation, the Dixons stopped making payments on their loan and submitted the requested financial information—only to learn subsequently that the bank had initiated foreclosure proceedings against them. They contend that Wells Fargo ought have anticipated their compliance with the terms of its promise to consider them for a loan modification. Not only was it reasonable that they would rely on the promise, but also their reliance left them considerably worse off, for by entering into default they became vulnerable to foreclosure.

The question whether these allegations are sufficient to state a claim for promissory estoppel requires a close look at the doctrine's evolution in the law of Massachusetts. In Loranger Const. Corp. v. E.F. Hauserman Co., 376 Mass. 757, 384 N.E.2d 176 (1978), the Supreme Judicial Court recognized the enforceability of a promise on the basis of detrimental reliance, but declined to “use the expression ‘promissory estoppel,’ since it tends to confusion rather than clarity.” Id. at 760–61, 384 N.E.2d 176. The court reasoned that [w]hen a promise is enforceable in whole or in part by virtue of reliance, it is a ‘contract,’ and it is enforceable pursuant to a ‘traditional contract theory’ antedating the modern doctrine of consideration.” Id. at 761, 384 N.E.2d 176. Since Loranger, the court has adhered to its view that “an action based on reliance is equivalent to a contract action, and the party bringing such an action must prove all the necessary elements of a contract other than consideration.” Rhode Island Hosp. Trust Nat'l Bank v. Varadian, 419 Mass. 841, 850, 647 N.E.2d 1174 (1995).

“An essential element in the pleading and proof of a contract claim is, of course, the ‘promise’ sought to be enforced.” Kiely v. Raytheon Co., 914 F.Supp. 708, 712 (D.Mass.1996) (O'Toole, J.). Thus, even where detrimental reliance acts as a substitute for consideration, the promise on which a claim for promissory estoppel is based must be interchangeable with an offer “in the sense of ‘commitment.’ Cataldo Ambulance Serv., Inc. v. City of Chelsea, 426 Mass. 383, 386 n. 6, 688 N.E.2d 959 (1998). The promise must demonstrate “an intention to act or refrain from acting in a specified way, so as to justify a promisee in understanding that a commitment has been made.” Varadian, 419 Mass. at 849–50, 647 N.E.2d 1174 (quoting Restatement (Second) of Contracts § 2 (1981)). That the representation is of future, rather than present, intention will not preclude recovery, so long as the promisor's expectation to be legally bound is clear. See Sullivan v. Chief Justice for Admin. & Mgt. of Trial Court, 448 Mass. 15, 28 & n. 9, 858 N.E.2d 699 (2006) (quoting Boylston Dev. Group, Inc. v. 22 Boylston St. Corp., 412 Mass. 531, 542 n. 17, 591 N.E.2d...

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