Payton v. Wells Fargo Bank, N.A.

• Decision Date: 28 February 2013
• Docket Number: Civil Action No. 12-11540-DJC
• Parties: TODD C. PAYTON, Plaintiff, v. WELLS FARGO BANK, N.A. AS TRUSTEE FOR OPTION ONE WOODBRIDGE LOAN TRUST 2003-2, ASSET BACKED CERTIFICATES, SERIES 2003-2 AND AMERICAN HOME MORTGAGE SERVICING, INC., Defendants.
• Court: U.S. District Court — District of Massachusetts

TODD C. PAYTON, Plaintiff,

v. WELLS FARGO BANK, N.A. AS TRUSTEE FOR OPTION ONEWOODBRIDGE LOAN TRUST 2003-2, ASSET BACKED CERTIFICATES, SERIES 2003-2AND AMERICAN HOME MORTGAGE SERVICING, INC., Defendants.

Civil Action No. 12-11540-DJC

UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS

February 28, 2013

MEMORANDUM AND ORDER

CASPER, J.

I. Introduction

Plaintiff Todd C. Payton ("Payton") has brought suit against Wells Fargo Bank, N.A., as trustee for Option One Woodbridge Loan Trust 2003-2, Asset Backed Certificates, Series 2003-2 ("Wells Fargo") and American Home Mortgage Servicing, Inc. ("AHMSI") (collectively, the "Defendants"), asserting claims that arise out of a scheduled foreclosure sale of Payton's home. Payton has asserted claims of breach of contract, breach of the covenant of good faith and fair dealing, intentional infliction of emotional distress, negligent misrepresentation and preliminary injunctive relief. Wells Fargo has moved to dismiss the complaint pursuant to Fed. R. Civ. P.12(b)(6). For the reasons set forth below, the Court GRANTS Wells Fargo's motion in part and DENIES the motion in part.

II. Standard of Review

In considering a motion to dismiss for failure to state a claim upon which relief can be granted pursuant to Fed. R. Civ. P. 12(b)(6), the Court will dismiss a complaint or a claim that fails to plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). To state a plausible claim, a complaint need not contain detailed factual allegations, but it must recite facts sufficient to at least "raise a right to relief above the speculative level . . . on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Id. at 555. "A pleading that offers 'labels and conclusions' or 'a formulaic recitation of the elements of a cause of action will not do.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 555). "Nor does a complaint suffice if it tenders 'naked assertion[s]' devoid of 'further factual enhancement.'" Id. (quoting Twombly, 550 U.S. at 557) (alteration in original). At bottom, a complaint must contain sufficient factual matter that, accepted as true, would allow the Court "to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id.

III. Factual Allegations

Unless otherwise noted, the relevant facts are as alleged in the complaint.

Payton resides at 107 Howland St. in Dorchester, Massachusetts ("the Property"), which he purchased on April 14, 1998 as his primary residence. Compl. ¶¶ 5, 8. On October 25, 2002, Payton took out a new mortgage on the Property with Option One Mortgage Corporation in the amount of $320,000. Id. ¶ 9. On August 1, 2007, the mortgage on the Property was assigned to Wells Fargo. Id. ¶ 11. AHMSI is the servicer of this mortgage, id. ¶ 7, and entered into aServicer Participation Agreement ("SPA") with Fannie Mae under the Home Affordable Modification Program ("HAMP"). Ex. A, Pl. Opp. Payton made regularly scheduled payments on the mortgage starting on December 1, 2005, but later became delinquent because he lost his job. Compl. ¶¶ 12, 14. When Payton received notice that his account showed a default, he began "attempting to negotiate with AHMSI in order to work out a solution that would allow him to retain his home." Id. ¶ 16. Payton meets the threshold criteria to be considered for a loan modification under HAMP and has applied for a modification on multiple occasions. Id. ¶ 17. Although Payton submitted all of the required documentation and updated his application on a regular basis, he has been "re-routed," "hung up on" and his application has not received proper consideration for acceptance into the HAMP program. Id. ¶¶ 17-18. The Defendants scheduled a public auction of the Property on July 23, 2012. Id. ¶ 19. The foreclosure sale has been postponed and has not been rescheduled. Def. Mem. at 3, n.1; Pl. Opp. at 2.

IV. Procedural History

On July 19, 2012, Payton filed the instant complaint in Suffolk County Superior Court asserting claims for breach of contract (Count I), breach of the covenant of good faith and fair dealing (Count II), intentional infliction of emotional distress (Count III) and negligent misrepresentation (Count IV). D. 1-1. Payton also seeks injunctive relief (Count V). Id. Wells Fargo removed the action to federal court. D. 1. Wells Fargo has now moved to dismiss the complaint pursuant to Fed. R. Civ. P. 12(b)(6). D. 6. After a hearing on the motion to dismiss on February 27, 2013, the Court took the matter under advisement.

V. Discussion

A. Count I: Breach of Contract

In Count I, Payton alleges that the Defendants have executed "HAMP contracts" or SPAs with Fannie Mae¹ and that he is an intended third-party beneficiary under HAMP. Compl. ¶¶ 24-25, 27; Pl. Opp. at 6. Payton asserts a breach of contract claim on the basis that the Defendants "failed and/or delayed processing of [his] application for a HAMP loan modification" and therefore, did not fulfill their obligations under HAMP. Compl. ¶¶ 25, 28. However, "while it is true that the SPA is intended to benefit homeowners, it does not necessarily follow that the parties to the SPA intended to bestow legal rights upon homeowners." In re Mitchell, 476 B.R. 33, 54 (Bankr. D. Mass. 2012); see also Markle v. HSBC Mortg. Corp. (USA), 844 F. Supp. 2d 172, 182 (D. Mass. 2011) (explaining that there is an "important difference between an intent to benefit borrowers and an intent to confer upon borrowers a right to enforce servicers' HAMP obligations"). "The prevailing view in this district and others is that defaulted mortgagors are not entitled to sue for HAMP violations as third-party beneficiaries under an agreement between the bank and the government absent a clear indication in the contract to the contrary." Seidel v. Wells Fargo Bank, N.A., No. 12-10766-RWZ, 2012 WL 2571200, at *3 (D. Mass. July 3, 2012). Accordingly, as a majority of federal courts have determined, there is no private right of action under HAMP. Kirtz v. Wells Fargo Bank N.A., No. 12-10690-DJC, 2012 WL 5989705, at *3 (D. Mass. Nov. 29, 2012); see also McBride v. Am. Home Mortg. Servicing Inc., No. 11-10998-RWZ, 2012 WL 931247, at *3 (D. Mass. Mar. 19, 2012). Since this Court concludes that Payton has no viable HAMP-based breach of contract claim, it grants Wells Fargo's motion to dismiss as to Count I.

B. Count II: Breach of the Covenant of Good Faith and Fair Dealing

In Count II, Payton alleges that the "Defendants' pursuit of foreclosure and title to the Plaintiff's home at a time when the Defendants are required to suspend foreclosure proceedings pending a HAMP evaluation is a breach of the covenant of good faith and fair dealing." Compl. ¶ 32. Every contract contains an implied covenant of good faith and fair dealing. Anthony's Pier Four, Inc. v. HBC Assocs., 411 Mass. 451, 471 (1991). The covenant only "governs conduct of parties after they have entered into a contract; without a contract, there is no covenant to be breached." Mass. Eye & Ear Infirmary v. QLT Phototherapeutics, Inc., 412 F.3d 215, 230 (1st Cir. 2005). Payton does not specify in the complaint what contract he alleges gives rise to this claim, whether he is relying on the SPA or the mortgage contract. Compl. ¶¶ 30-31.

Payton cannot sustain a claim for breach of the covenant of good faith and fair dealing based upon a contract Wells Fargo allegedly entered into with Fannie Mae under HAMP because he is neither a party to the contract nor a third-party beneficiary of same. See Kirtz, 2012 WL 5989705, at *4; Seidel, 2012 WL 2571200, at *3.

Payton also cannot sustain this claim based upon the mortgage contract as he argues that he is doing in his opposition to the motion to dismiss. Pl. Opp. at 6. Payton argues that Wells Fargo "violated the implied covenant of good faith and reasonable diligence inherent in the power of sale in every mortgage contract in Massachusetts" by failing to consider him for a loan modification and for scheduling a foreclosure sale without this consideration. Id. at 6-7; Compl. ¶ 32. In Massachusetts, the power of sale, which "may be incorporated in any mortgage," authorizes the mortgagee, upon default of the mortgagor, to sell the property at public auction, "first complying with the terms of the mortgage and with the statutes relating to the foreclosure of mortgages by the exercise of a power of sale." Mass. Gen. L. c. 183, § 21. "[T]he basic ruleof law applicable to the foreclosure of real estate mortgages is that 'a mortgagee in exercising a power of sale in a mortgage must act in good faith and must use reasonable diligence to protect the interests of the mortgagor.'" Seppala & Aho Const. Co., Inc. v. Petersen, 373 Mass. 316, 320 (1977) (quoting W. Roxbury Co-op. Bank v. Bowser, 324 Mass. 489, 492 (1949)). However, Payton has not made any allegations that Wells Fargo has exercised the power of sale because the complaint is devoid of allegations that the Property has been sold at auction and the parties have reported to the Court that any foreclosure sale has been postponed. Def. Mem. at 3, n.1; Pl. Opp. at 2; see Housman v. LBM Fin., LLC, 80 Mass. App. Ct. 213, 220-21 (2011) (noting the distinction "between notice requirements, compliance with which is required to successfully conduct a foreclosure by power of sale, and the exercise of the power of sale itself" and stating that "the power of sale is exercised at the time of the actual sale"). Because Wells Fargo has not yet exercised the power of sale, there cannot be any plausible claim that the mortgagee has failed to exercise such power in good faith or exercise reasonable diligence to protect the interests of the mortgagor. Mackenzie v. Flagstar Bank, FSB, No. 11-12014-MBB, 2013 WL 139738, at *10 (D. Mass. Jan. 9, 2013) (holding that "it [was] not possible" for the defendant to have breached the duty of...