Taylor v. JPMorgan Chase Bank, N.A.

• Decision Date: 30 April 2020
• Docket Number: No. 17-3019,17-3019
• Citation: 958 F.3d 556
• Parties: Anthony G. TAYLOR, Plaintiff-Appellant, v. JPMORGAN CHASE BANK, N.A., Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

958 F.3d 556

Anthony G. TAYLOR, Plaintiff-Appellant,

v.JPMORGAN CHASE BANK, N.A., Defendant-Appellee.

No. 17-3019

United States Court of Appeals, Seventh Circuit.

Argued September 5, 2019

Decided April 30, 2020

Bradley Girard, Attorney, Brian Wolfman, Attorney, Georgetown University Law Center, Washington, DC, for Plaintiff - Appellant.

Jill M. Wheaton, Attorney, Dykema Gossett PLLC, Ann Arbor, MI, for Defendant - Appellee.

Before Sykes, Hamilton, and Scudder, Circuit Judges.

Scudder, Circuit Judge.

Anthony Taylor is one of many homeowners who fell behind on their mortgage payments during the 2008 subprime mortgage crisis and sought help under the Home Affordable Mortgage Program. HAMP was a Treasury Department program that allowed eligible homeowners to reduce their monthly mortgage payments in an effort to avoid foreclosure. The first step toward a permanent loan modification was for qualifying borrowers to enter into a Trial Period Plan with their lenders and make lower payments on a provisional basis.

Taylor’s lender, JPMorgan Chase, informed him of the HAMP opportunity and sent him a proposed TPP agreement to be signed and returned to the bank to get the process started. That agreement contained a provision stating that the trial period would not begin until both parties signed the TPP and Chase then returned to Taylor a copy bearing its signature. Taylor signed the proposed agreement, but Chase never did, and Taylor’s loan was never modified. Taylor later sued Chase, contending that the bank failed to honor its loan-modification offer.

The district court found that the facts as Taylor had alleged them in his complaint and a later proposed amended complaint did not suffice to state a claim, so it granted judgment on the pleadings for Chase and denied as futile Taylor’s request to amend the complaint. The key shortcoming on the breach of contract claim, the district court concluded, was Taylor’s failure to allege that Chase had signed and returned a copy of the TPP—a condition precedent to enrolling him in the trial period. We agree and affirm.

I

A brief introduction to the Home Affordable Modification Program, or HAMP, will prove helpful. Congress enacted the Emergency Economic Stabilization Act in 2008 as a response to the disaster then unfolding in the financial markets. The statute provided for the Troubled Asset Relief Program, under which the Secretary of the Treasury was to assist homeowners and minimize foreclosures. See 12 U.S.C. § 5219(a)(1). As part of that endeavor, the Secretary provided financial incentives to banks in exchange for allowing struggling homeowners to refinance their mortgages. HAMP was one such program. Only certain borrowers were eligible, and those who were had to complete two steps to receive a permanent loan modification. First, qualifying borrowers entered a Trial Period Plan, or TPP, with the lender. Borrowers made reduced payments during that specified time. If the borrower complied with the terms of the TPP, the lender would then offer a permanent loan modification. With that background in mind, we turn to the facts Anthony Taylor alleged in his complaint against Chase.

A

Taylor held a mortgage with JPMorgan Chase and like many others, he missed payments during the financial crisis. But in August 2009, a lifeboat came into view when a Chase representative called and told Taylor he prequalified for assistance under HAMP.

Shortly thereafter Taylor received paperwork from Chase that provided more details about HAMP and instructions for how to move forward in the process. Taylor attached a copy of those documents to his complaint. See FED. R. CIV . P. 10(c) ("A copy of a written instrument that is an exhibit to a pleading is a part of the pleading for all purposes."). The bank’s cover letter explained that Taylor "may qualify" for a TPP, adding that if he proved eligible and complied with the trial-period terms, Chase would permanently modify his loan and allow him to avoid foreclosure. To accept the offer proposed by the TPP, the letter instructed Taylor to "return[ ] the signed Trial Period Plan, along with other required documents and first payment" and to complete the other steps described in an appended checklist.

Attached to the cover letter was a list of Frequently Asked Questions. The answer to one question explained that it might take "up to 30 days" for Chase to receive and review Taylor’s documents, with the bank then processing any modification request "as quickly as possible." The answer to another provided that if Taylor "d[id] not qualify for the program" then his "first trial payment [would] be applied to [his] existing loan in accordance with the terms of [his] loan documents."

Then there was the TPP document itself. It provided that Taylor’s trial period would last three months—from September to November 2009—during which he had to make monthly payments of $372. It further stated, however, that the proposed TPP agreement would "not take effect unless and until both [Taylor] and [Chase] sign it and [Chase] provides [Taylor] with a copy of this Plan with [Chase’s] signature." Moreover, no permanent modification would result if "[Chase] does not provide [Taylor] a fully executed copy of this Plan and the Modification Agreement" before the "Modification Effective Date." The TPP concluded with two signature lines—one for Taylor and another for Chase.

Taylor wrote his name on the dotted line and returned the TPP to Chase together with the other required documents and his first of the three payments. From there, however, the bank never returned a fully executed copy of the TPP to Taylor. Instead, Chase sent Taylor multiple notices that his HAMP modification was in jeopardy because he had not provided the bank with the necessary supporting paperwork. For his part, Taylor believed he had already sent the requested documents, but he went ahead and resent them to be certain. He then continued making the modified payments, timely submitting all three required by the terms of the TPP. Yet the trial period came and went and Taylor received no permanent modification of his loan.

B

Based on those allegations, Taylor sued Chase in Indiana state court, asserting claims for breach of contract and promissory estoppel. He represented himself in the proceedings. Chase removed the suit to federal court and then moved for judgment on the pleadings under Federal Rule of Civil Procedure 12(c). The bank attached to its motion a May 2010 letter informing Taylor that he did not qualify for HAMP because the ratio of his monthly housing expense to his gross monthly income did not meet the requirement for permanent loan modification.

Once briefing on Chase’s motion was underway, Taylor submitted a motion of his own. He requested leave to modify his pleading and attached the amended complaint he sought to file. The proposed amended complaint added two new claims under Indiana law—one for fraud, based on an allegation that Chase misrepresented the status of his HAMP modification, and another for the intentional infliction of emotional distress.

The amendment added detail about Taylor’s communications with Chase during the trial period. Taylor clarified that the initial call he received from Chase about his HAMP prequalification came from someone named Chris Montgomery. Taylor alleged that Montgomery "verbally offered" a HAMP trial period modification, which Taylor then accepted before the call concluded. The following month, after he sent in the required paperwork, Taylor spoke with Montgomery once again, this time to ask about the status of his modification and when he could expect to receive the countersigned and fully executed TPP from the bank. Montgomery responded that the documents were "in receipt for processing" and he "did not know of any situation in which Chase returns fully executed copies of TPP agreements to customers."

In his proposed amended complaint, Taylor also added that he followed up on his application a couple of weeks later and a different Chase representative told him his documents had been received and were being forwarded to a supervisor. In November 2009, yet another representative informed Taylor that his file was being sent to an analyst for "pre closing." Taylor maintained that the combined effect of these statements by Chase’s representatives waived any condition precedent that otherwise required the bank to countersign and return a fully executed version of the TPP before enrolling him in the trial-modification plan.

C

The district court referred Chase’s motion for judgment on the pleadings and Taylor’s motion to amend his complaint to a magistrate judge. The magistrate then recommended granting the former and denying the latter as futile. In doing so, the magistrate considered the allegations in both the original complaint and the proposed amended complaint all at once, concluding that none sufficed to state a claim.

The district court agreed and adopted the magistrate’s recommendation. The court held that Taylor’s complaint failed to allege the existence of a binding agreement with Chase, an essential element of any breach of contract claim. "[B]ecause Chase never signed and returned the agreement," the court explained, "there was no offer, and no contract was ever created." Taylor’s promissory estoppel claim fared no better, since the court found that he had not pleaded that he had relied to his detriment on any promise made by Chase. Nor did Taylor’s allegations support his proposed claims for fraud or intentional infliction of emotional distress. Summing each of these conclusions, the court entered judgment in favor of Chase, and Taylor appealed.

II

We review the district court’s judgment on the pleadings de novo , and, because the district court denied Taylor’s request to amend the complaint on futility grounds, we apply the same standard to that decision. See Dennis v. Niagara Credit Sols., Inc. , 946 F.3d 368, 370 (7th Cir. 2019) ; Heng v. Heavner, Beyers & Mihlar,...