Durmic v. Bank
| Decision Date | 24 November 2010 |
| Docket Number | CIVIL ACTION NO. 10-CV-10380-RGS |
| Parties | RAMIZA DURMIC, DONALD TREANNIE, HEATHER TREANNIE, JEAN LICATA AND ARSENIA RODRIGUES, on behalf of themselves and all others similarly situated, v. J.P. MORGAN CHASE BANK, NA, |
| Court | U.S. District Court — District of Massachusetts |
STEARNS, D.J.
Homeowner plaintiffs Ramiza Durmic, Donald Treannie, Heather Treannie, Jean Licata, and Arsenia Rodrigues brought this diversity lawsuit alleging common-law claims for breach of contract (Count I), breach of the implied covenant of good faith and fair dealing (Count II), promissory estoppel as an alternative theory to recovery (Count III), and violation of the Massachusetts Consumer Protection Act, Mass. Gen. Laws ch. 93A (Count IV).1 On July 12, 2010, defendant J.P. Morgan Chase Bank, NA (Chase), moved to dismiss the Complaint pursuant to Fed. R. Civ. P. 12(b)(6). On August 20, 2010, plaintiffs moved for a preliminary injunction to prevent Chase from foreclosing on their own mortgages and those of others similarly situated. A hearing on the two motions was held on November 22, 2010.
The facts in the light most favorable to plaintiffs as non-moving parties are as follows. Plaintiffs are homeowners who obtained home mortgage loans from third-party lenders and whose loans are now serviced by Chase. After being persuaded to participate in the Obama Administration's Home Affordable Modification Program (HAMP), 2 Chase solicited some of its customers who were having difficulty staying current with their mortgages to apply for a loan modification to make the monthly payments more affordable. In other cases, borrowers who had independently learned of HAMP initiated the request for a modification. Under the HAMP guidelines, before any applicant receives a mortgage modification, the bank is to conduct a Net Present Value (NPV) test3 to determine the borrower's pre-eligibility. If the borrower appears to qualify under the HAMP guidelines, he or she is given a document entitled Home Affordable Modification Trial Period Plan (TPP). The TPP is a Fannie Mae/Freddie Mac "Uniform Instrument" that has the appearances of a contract.4The Chase TPP begins with the following recitation.
If I am in compliance with this Trial Period Plan (the "Plan") and my representations in Section 1 continue to be true in all material respects, then the Lender will provide me with a Home Affordable Modification Agreement ("Modification Agreement"), as set forth in Section 3, that would amend and supplement (1) the Mortgage on the Property, and (2) the Note secured by the Mortgage.
* * *
I understand that after I sign and return two copies of this Plan to the Lender, the Lender will send me a signed copy of this Plan if I qualify for the Offer or will send me written notice that I do not qualify for the Offer. This Plan will not take effect unless and until both I and the Lender sign it and Lender provides me with a copy of this Plan with the Lender's signature.
After setting out a series of good faith representations required of the borrower, and obligating the borrower to submit proof of current income, the TPP then lists individualized payment terms for a three-month trial period.5 In the following section entitled "Time is of the Essence," the TPP states:
[i]f prior to the Modification Effective Date, (i) the Lender does not provide me a fully executed copy of this Plan and the Modification Agreement; (ii) I have not made the Trial Period payments required under Section 2 of this Plan; or (iii) the Lender determines that my representations in Section 1 are no longer true and correct, the Loan Documents will not be modified and this Plan will terminate. In this event, the Lender will have all of the rights and remedies provided by the Loan documents, and any payment I make under this Plan shall be applied to amounts I owe under the Loan Documents and shall not be refunded to me;.... 6
After successfully passing the NPV test and meeting other HAMP criteria, each of the named plaintiffs received a TPP, which they signed and returned to Chase. Each of the plaintiffs submitted the required proof of income and all but plaintiff Jean Licata made the three required payments.7 None of the named plaintiffs, however, received an executed copy of the TPP or a Modification Agreement.
Plaintiffs seek certification of a class consisting of all Massachusetts borrowers who entered into a written TPP Agreement with Chase and made the payments identified in Section 2, other than the borrowers to whom Chase sent either a Home Affordable Modification Agreement prior to the date of class certification or a written denial of eligibility on or before the Modification Effective Date in Section 2 of the borrower's TPP Agreement.8 Plaintiffs also request a permanent injunction enjoining Chase from foreclosing on their mortgages or the mortgages of any member of the proposed class; an order requiring Chase to "appropriately train" its employees to perform their "duties" under HAMP; an order for specific performance of Chase's alleged contractual obligations; and actual or statutory damages as well as multiple damages and litigation costs (including attorneys' fees). First Am. Compl. ¶ 169.
To survive a motion to dismiss, a complaint must allege "a plausible entitlement to relief." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 559 (2007). "While a complaint attacked by a Rule 12(b)(6) motion does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do."]d. at 555 (internal citations omitted). See also Rodriguez-Ortiz v. Margo Caribe, Inc., 490 F.3d 92, 95-96 (1st Cir. 2007). The court may also look to documents, the authenticity of which are not disputed by the parties, to documents central to the plaintiff's claim, and to documents referenced in the complaint. Watterson v. Page, 987 F.2d 1, 3-4 (1st Cir. 1993).
"To state a claim for breach of contract under Massachusetts law, a plaintiff must allege, at a minimum, that there was a valid contract, that the defendant breached its duties under its contractual agreement, and that the breach caused the plaintiff damage." Guckenberger v. Boston Univ., 957 F. Supp. 306, 316 (D. Mass. 1997) (citations omitted). To establish a breach, plaintiff has the burden of proving the failure of the defaulting party to conform to one or more of the contract's material terms. A term is material when it involves "an essential and inducing feature" of the contract. Buchholz v. Green Bros. Co., 272 Mass. 49, 52 (1930).
Chase argues that the plaintiffs' breach of contract claim fails as a matter of law because the purported agreement lacks any legally cognizable form of consideration. The contract must be a "bargained-for exchange in which there is a legal detriment of the promisee or a corresponding benefit to the promisor." Neuhoff v. Marvin Lumber & Cedar Co., 370 F.3d 197, 201 (1st Cir. 2004) (internal citation and quotations marks omitted). Here, Chase contends, plaintiffs are barred from using their payments under the TPP as consideration because of the settled rule that "performance of a pre-existing legal duty that is neither doubtful nor subject to honest and reasonable dispute is not valid consideration where the duty is owed to the promisor, or to the public at large." In re Lloyd, Carr & Co., 617 F.2d 882, 890 (1st Cir. 1980).
Chase's citations to cases standing for the proposition that consideration is lacking where a mortgagor pays a discounted amount in satisfaction of an existing debt (see Def.'s Mot. to Dismiss at 13) are, however, inapposite. Here, plaintiffs relinquished more than the TPP payments. Under the TPP, they were required to provide documentation of their current income, make legal representations about their personal circumstances, and agree to undergo credit counseling if requested to do so by Chase. See First Am. Compl.-Ex. 9. Plaintiffs could also be required to make payments into a newly established escrow account. First. Am. Compl.-Ex. 2 at 11. Plaintiffs were under no preexisting legal obligation to meet any of these conditions. The settled rule defines one type of valid consideration as consisting of a legal detriment to the promisee that entails even the slightest trouble or inconvenience. See, e.g., Wit v. Commercial Hotel Co., 253 Mass. 564, 572 (1925); see also 3 Samuel Williston, A Treatise on the Law of Contracts § 7:4 (4th ed. 2008). As the Supreme Judicial Court has explained, "[i]t is enough that the consideration is valuable; it need not be adequate." Barnett v. Rosen, 235 Mass. 244, 249 (1920).
Consideration may also be measured by the benefit a promise confers on the other party. Plaintiffs point to the fact that where the TPP required borrowers to establish new escrow accounts for their mortgage payments, the risk to Chase of a default on property tax obligations was reduced, thereby increasing the value of Chase's security interest. Pls.' Opp'n Mot. to Dismiss at 11. Mandatory credit counseling also presumably reduced the risk of default. Id. Plaintiffs' provision of detailed financial information allowed Chase to predict with greater certainty their ability to pay. Id at 11-12. Thus, although plaintiffs need only allege a legal detriment on their part or a benefit to Chase to establish sufficient consideration, for present purposes, they have alleged both.
Chase next argues that plaintiffs have not alleged legally cognizable damages because they have failed to establish a causal connection between any harm they might have suffered and their participation in the Trial Period Program. None of the named plaintiffs has had his or her home foreclosed, 10 and any attendant mental...
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