Fisher v. HSBC Bank

Citation: 332 F. Supp. 3d 435Docket: Civil Action No. 17-12532-NMG

Court: District Court, District of Columbia; September 18, 2018; Federal District Court

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Denise Fisher initiated a legal dispute regarding a Home Affordable Modification Program (HAMP) Trial Period Plan related to her mortgage on a property in Hull, Massachusetts. Fisher claims that HSBC Bank, as trustee for Deutsche Mortgage Securities Trust, and its predecessor, Bank of America, breached a contract to consider a loan modification under specified conditions. Ocwen Loan Servicing, the current loan servicer, is also named in the action. HSBC Bank and Ocwen, along with Bank of America, have filed motions to dismiss the complaint.

Fisher purchased the property in 1986 and became the sole owner in 1992. In 2003, she executed a promissory note for a loan with Greenpoint Mortgage, secured by a mortgage granted to Mortgage Electronic Registration Systems as nominee for Greenpoint. The mortgage was later assigned to HSBC Bank in 2011, and Ocwen began servicing the loan in December 2013.

In late 2009, Fisher received a HAMP TPP from Bank of America, which required her to make three trial payments by specific dates in early 2010. The TPP outlined conditions for modification, including the necessity for the servicer to provide a fully executed plan and modification agreement before the modification effective date of April 1, 2010. The TPP also stipulated that if Fisher failed to meet any requirements, the loan would not be modified, and prior payments would be applied to the outstanding loan balance without refund. Only upon meeting all conditions and receiving a modification agreement would the loan documents be modified, reflecting any new payment amounts and waiving unpaid late charges.

Fisher signed the TPP agreement in December 2009 and commenced TPP payments in January 2010. After a three-month trial period, Bank of America (BANA) did not provide a loan modification agreement. Fisher claims she was instructed by a BANA representative to continue making modified payments, which she did until September 2011. She made 18 consecutive payments that BANA accepted until September 2011, when BANA returned her payment, prompting her inquiry about the missing modification agreement. In early 2012, Fisher learned from BANA that Wells Fargo was her "investor," and a BANA representative later informed her that her modification was denied due to her investor's non-participation in the Home Affordable Modification Program (HAMP). Fisher contested BANA's claim that her only income was unemployment benefits, asserting that she was employed, as outlined in her HAMP application. She alleges BANA and HSBC breached an oral promise to modify her payment schedule and seeks a declaration that a loan modification occurred, arguing it would be inequitable for HSBC to foreclose on her property. Fisher filed her action in the Massachusetts Superior Court in September 2017, amending it in November 2017, after which HSBC and Ocwen removed the case to federal court in December 2017.

To withstand a motion to dismiss, a complaint must present sufficient factual matter that is plausible on its face, relying only on the facts within the pleadings, attached documents, and matters subject to judicial notice. All factual allegations must be accepted as true, with reasonable inferences drawn in the plaintiff’s favor. If the complaint's facts are adequate to support a cause of action, the motion to dismiss should be denied. While the court accepts factual allegations as true, it does not apply this to legal conclusions. Fisher argues BANA made an implicit promise to modify her loan if she refrained from filing for bankruptcy, but the defendants counter that her claim is barred by the statute of limitations and statute of frauds, asserting that the complaint fails to present a valid claim for relief.

The Massachusetts Statute of Frauds mandates that any contract for the sale of land or interests therein must be in writing and signed by the involved parties (M.G.L. c. 259, § 1). The parties acknowledge that the mortgage in question is subject to this statute. The plaintiff asserts that BANA orally modified the Trial Payment Plan (TPP), claiming such modifications are exempt from the statute. However, there are conflicting case law interpretations: one case (French v. Chase Bank) views the TPP as subject to the statute due to its connection to the mortgage, while another (Nickerson-Reti v. Bank of Am. N.A.) holds that the statute does not apply to the TPP, which does not modify the loan. The Court aligns with the latter, emphasizing that the TPP explicitly states it does not modify the Loan Documents and is merely preparatory to a potential loan modification, contingent upon specific conditions. Consequently, the statute of frauds bars the plaintiff's claim for a fully enforceable loan modification.

Regarding the statute of limitations, the defendants contend that the plaintiff's breach of contract claim is time-barred, as such claims must be filed within six years of the breach (M.G.L. c. 260, § 2). A breach is generally recognized when the plaintiff becomes aware of the harm. The plaintiff contends that she was instructed by a BANA representative to continue making modified payments post-trial period, and BANA accepted these payments until September 2011, when they returned her payment. Given these facts, the Court finds that the plaintiff acted with reasonable diligence and was not aware of the breach until September 6, 2011. Since her complaint was filed on September 1, 2017, it falls within the six-year limit, and thus is not barred by the statute of limitations.

BANA asserts that the plaintiff, Fisher, has not presented a plausible claim for breach of contract. Fisher contends she has adequately alleged that BANA agreed to modify her loan in exchange for her agreement not to file for bankruptcy, which BANA allegedly breached. Under Massachusetts law, a breach of contract claim requires proof of (1) an agreement supported by consideration, (2) the plaintiff's readiness and ability to perform, (3) the defendant's failure to fulfill a material obligation, and (4) harm caused by that failure. While BANA challenges the existence of damages and the validity of Fisher's performance under the Trial Period Plan (TPP), the court must accept as true all non-conclusory factual allegations. Fisher claims she was instructed by a BANA representative to continue modified payments, which could imply a plausible agreement to modify her loan. Massachusetts law allows for modifications of written contracts through subsequent oral agreements if backed by valid consideration, although the burden of proof lies heavily on the party seeking to modify. At this preliminary stage, Fisher has sufficiently alleged her case. Furthermore, she has indicated potential foreclosure on her property if the modification is not granted and has lost rights under the Truth in Lending Act due to the expiration of the statute of limitations while awaiting BANA's response. BANA's argument that Fisher's compliance with the TPP was speculative is countered by her allegations of having made payments for 18 months. The court finds no issue with statute of frauds or limitations in her breach of contract claim, leading to the denial of BANA's motion to dismiss this count.

Regarding promissory estoppel, BANA argues that Fisher has not shown reasonable reliance on a promise or resulting damages. To establish a promissory estoppel claim in Massachusetts, a plaintiff must demonstrate reasonable reliance on a promise to their detriment.

BANA committed to sending a Modification Agreement if Fisher submitted the necessary financial forms and made three Trial Payment Plan (TPP) payments. Fisher complied for 18 months until BANA ceased accepting her modified payments, despite a representative's advice to continue after the trial period. This led her to refrain from filing for bankruptcy and missing a potential Truth in Lending Act claim. Given the representative's instructions and BANA's acceptance of her payments until August 2011, it was reasonable for her to continue payments, suggesting BANA may have waived the TPP's termination clause that was set for April 1, 2010. Fisher has sufficiently asserted a claim for promissory estoppel, leading to the denial of the defendants' motions to dismiss Count II. Regarding her claim for declaratory relief, the court found she had presented plausible claims for breach of contract and promissory estoppel, resulting in the denial of the motions to dismiss Count III as well. Although BANA did not formally sign the TPP, it did not argue that this negated the formation of a contract, and Fisher's payments over 18 months support a plausible claim of a valid contract.