NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-4599-12T1
LEONARDO ARIAS and
RUTH M. PADILLA,
APPROVED FOR PUBLICATION
Plaintiff-Appellants,
January 23, 2015
v.
APPELLATE DIVISION
ELITE MORTGAGE GROUP, INC.,
RAY SALAZAR, W.M.C. MORTGAGE,
CORPORATION, GE MONEY, GE
CAPITAL, and DEUTSCHE BANK,
Defendants,
and
BANK OF AMERICA, N.A., s/h/a
BANK OF AMERICA HOME LOANS,
Defendant-Respondent.
______________________________
Submitted December 9, 2014 – Decided January 23, 2015
Before Judges Reisner, Koblitz and Haas.
On appeal from the Superior Court of New
Jersey, Law Division, Bergen County, Docket
No. L-1316-12
Joseph A. Chang, attorney for appellants
(Mr. Chang, of counsel and on the brief;
Jeffrey Zajac, on the brief).
Reed Smith LLP, attorneys for respondent
(Aaron M. Bender, of counsel and on the
brief).
The opinion of the court was delivered by
REISNER, P.J.A.D.
Plaintiffs Leonardo Arias and Ruth M. Padilla1 appeal from
an April 19, 2013 order granting summary judgment in favor of
defendant Bank of America, N.A. (the bank).
To summarize, this case involves a dispute over a mortgage
securing a loan plaintiffs obtained to purchase a two-family
house.2 Plaintiffs claim that they had a contractual right to a
loan modification under the terms of the Trial Period Plan (TPP)
Agreement they signed pursuant to the federal Home Affordable
Mortgage Program (HAMP), and they assert that defendant breached
the contract. In the alternative, they contend that the bank
violated the covenant of good faith and fair dealing in denying
them the loan modification.
1
Plaintiffs, husband and wife, both signed the mortgage, but
only Arias signed the note. We refer to Arias separately when
discussing documents addressed only to him.
2
There is no dispute that plaintiffs live in one unit and rent
out the other unit. At his deposition, Arias admitted that,
even after plaintiffs entirely ceased paying the mortgage, they
continued collecting between $1200 and $1800 per month from
tenants. There is also no dispute that at some point plaintiffs
stopped paying the taxes on the property, contrary to their
obligation under the mortgage.
2 A-4599-12T1
The motion judge concluded that the TPP Agreement was not a
binding contract to modify the loan. The judge found that
plaintiffs, who are licensed real estate agents, understood that
the Agreement did not give them any such contractual right. The
judge reasoned that the bank was not required to provide
plaintiffs with a loan modification, based on its determination
that they did not qualify for one. The judge also concluded
that plaintiffs had "no viable cause of action" under the
federal HAMP guidelines, or based on the covenant of good faith
and fair dealing.
Our review of a summary judgment order is de novo, using
the same standard employed by the trial court. Gray v. Caldwell
Wood Prods., Inc., 425 N.J. Super. 496, 499-500 (App. Div.
2012). Having reviewed the record, we find there were no
material facts in dispute, and we agree with the trial judge
that defendant was entitled to judgment as a matter of law. See
Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540
(1995). However, we arrive at that conclusion by a slightly
different route than the trial court.
I
Before reviewing the record and setting forth our own legal
analysis, we briefly discuss the most pertinent case law on
which the parties rely. In Wigod v. Wells Fargo Bank, N.A., 673
3 A-4599-12T1
F.3d 547 (7th Cir. 2012), the court cogently explained the
federal HAMP program, which was designed to address the
residential mortgage foreclosure crisis by encouraging lenders
to extend loan modifications to qualified mortgagors. Id. at
556-57; see Emergency Economic Stabilization Act of 2008, 12
U.S.C.A. § 5219(a)(1). The court concluded that, even though
there is no private cause of action under HAMP, a mortgagor may
nonetheless assert a common-law contract claim based on a bank's
failure to honor promises made in a HAMP Trial Period Plan
Agreement.3 The court reasoned that the terms of the TPP
Agreement must be construed as a promise by the bank that if the
debtor complies with its terms, she will be offered a loan
modification. The court thus described the TPP Agreement as
including "a unilateral offer to modify Wigod's loan conditioned
on her compliance with the stated terms of the bargain." Wigod,
supra, 673 F.3d at 562. The court reasoned that "a reasonable
person in Wigod's position would read the TPP as a definite
offer to provide a permanent modification that she could accept
so long as she satisfied the conditions." Ibid.; see also
3
HAMP provides financial incentives for mortgage servicers to
assist debtors to obtain loan modifications. Wigod, supra, 673
F.3d at 556; see also Young v. Wells Fargo Bank, N.A., 717 F.3d
224, 228-29 (1st Cir. 2013). We note that defendant in the case
before us acted as a loan servicer, but for simplicity, we refer
to defendant as the "bank."
4 A-4599-12T1
Corvello v. Wells Fargo Bank, N.A., 728 F.3d 878, 883-85 (9th
Cir. 2013); Young, supra, 717 F.3d at 234; Bosque v. Wells Fargo
Bank, N.A., 762 F. Supp. 2d 342 (D. Mass. 2011); West v.
JPMorgan Chase Bank, N.A., 154 Cal. Rptr. 3d 285 (Ct. App.),
rev. denied, 2013 Cal. LEXIS 5801 (July 10, 2013).
The court rejected the bank's argument that there was no
consideration for a promise to grant a loan modification because
the debtor was merely making a partial payment of a debt she
already owed. Wigod, supra, 673 F.2d at 564. The court pointed
out that in entering into the TPP Agreement, the debtor agreed
to provide additional financial information and agreed to attend
debt counseling if asked to do so. Ibid.4; see Seaview
Orthopaedics v. Nat'l Healthcare Res., Inc., 366 N.J. Super.
501, 508-09 (App. Div. 2004) (discussing adequacy of
consideration). The court also rejected the bank's argument
that the TPP Agreement left to the bank's sole and unbridled
discretion whether to actually send the debtor a loan
modification agreement once she complied with her obligations
under the TPP Agreement. The court found that such an
4
In a related point concerning plaintiff's promissory estoppel
claim, the court noted she had refrained from other legal
options she might have pursued, including filing for bankruptcy
or selling her home. Id. at 566.
5 A-4599-12T1
interpretation would render the TPP Agreement illusory. Wigod,
supra, 673 F.3d at 563.
While there are no reported New Jersey cases addressing the
contractual status of a TPP Agreement, case law suggests that an
agreement that purports to bind a debtor to make payments while
leaving the mortgage company free to give her nothing in return
might violate the New Jersey Consumer Fraud Act (CFA), N.J.S.A.
56:8-1 to -195. See Gonzalez v. Wilshire Credit Corp., 207 N.J.
557, 576-78 (2011). Gonzalez involved a different factual
scenario from the one in this case. However, in Gonzalez the
Court strongly signaled its disapproval of post-foreclosure
financing deals that essentially turned debtors into "cash cows"
without ever restoring their mortgages to current status. Id.
at 570, 582-83.
Wigod and Gonzalez were decided in different procedural
postures than the case before us. Wigod involved a motion to
dismiss on the pleadings. Gonzalez involved summary judgment
granted due to a mistaken interpretation of the CFA. In
remanding for trial, the Court noted that there were material
factual issues and plaintiff's factual claims "still must
survive the crucible of a trial." Gonzalez, supra, 207 N.J. at
586. In this case, the undisputed facts permitted the trial
court, and permit us as well, to decide the merits.
6 A-4599-12T1
II
As with all contract claims we begin our analysis by
considering the language of the document in question. See
Cooper River Plaza E., LLC v. Briad Grp., 359 N.J. Super. 518,
527 (App. Div. 2003). The TPP Agreement is captioned "HOME
AFFORDABLE MODIFICATION TRIAL PERIOD PLAN (Step One of Two-Step
Documentation Process)." The first sentence of the Agreement's
text states:
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 Servicer will
provide me with a Home Affordable
Modification Agreement ("Modification
Agreement"), as set forth in Section 3.
In turn, Section 3 provides, in pertinent part, that the
Servicer will determine the amounts of unpaid interest and other
charges to be added to the loan balance and determine "the new
payment amount." This section then repeats that:
If I comply with the requirements in Section
2 and my representations in Section 1
continue to be true in all material
respects, the Servicer will send me a
Modification Agreement for my signature.
[(Emphasis added).]
Significantly, Section 2 of the TPP required plaintiffs to
make three trial period payments of $1860 each, by the specified
due dates of October 1, 2009, November 1, 2009, and December 1,
7 A-4599-12T1
2009. Paragraph 2A notified plaintiffs, in capital letters,
that "TIME IS OF THE ESSENCE under this Plan." Paragraph 2
defined the "Modification Effective Date" as the first day of
the month following the month in which the last payment was due
(in this case, January 1, 2010). Paragraph 2F unambiguously
stated that:
If prior to the Modification Effective Date,
(i) the Servicer 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
Servicer 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.
[(Emphasis added).]
Paragraph 2G further put plaintiffs on notice that the TPP
itself was not a loan modification and their failure to strictly
comply with the terms of the TPP would result in denial of a
loan modification:
I understand that the Plan is not a
modification of the Loan Documents and that
the Loan Documents will not be modified
unless and until (i) I meet all of the
conditions required for modification, (ii) I
receive a fully executed copy of a
Modification Agreement, and (iii) the
Modification Effective Date has passed. I
further understand and agree that the
Servicer will not be obligated or bound to
make any modification of the Loan Documents
if I fail to meet any one of the
requirements under this Plan.
8 A-4599-12T1
[(Emphasis added).]
Based on our reading of the TPP Agreement, we conclude that
it was "a unilateral offer," pursuant to which the bank promised
to give plaintiffs a loan modification, if and only if
plaintiffs complied fully and timely with their obligations
under the TPP, including making all payments timely and
providing documentation establishing that the financial
representations they made to the bank in applying for the TPP
were accurate when made and continued to be accurate. See
Wigod, supra, 673 F.3d at 562; Young, supra, 717 F.3d at 234.
Thus, plaintiffs were required to demonstrate that, despite
their inability to make their regular mortgage payments, they
were at least financially reliable enough to make timely
payments in the reduced amount stated in the TPP Agreement.
And, they were required to document the representations they had
made to the bank, showing that they had the other necessary
qualifications for a modified loan.5
5
As Wigod noted, in 2009, the HAMP program allowed servicers to
extend TPP agreements without initially verifying the
applicants' representations as to their financial circumstances.
The verification would then take place during the trial period.
Wigod, supra, 673 F.3d at 557. In 2010, the program was
modified to require the servicers to verify the applicants'
financial qualifications before giving them a TPP agreement.
Id. at 557 n.2.
9 A-4599-12T1
The summary judgment record clearly establishes that
plaintiffs failed to comply with the payment schedule set forth
in paragraph 2 of the TPP Agreement. The bank's account records
show that instead of making three $1860 payments by the first of
the month in October, November and December 2009, plaintiffs
made a payment of $1860 payment on October 15, 2009, and a $930
payment on November 17, 2009. They paid nothing in December.
Thus, they almost immediately breached the terms of the TPP
Agreement by failing to make either timely or sufficient
payments. Indeed, for the three month period alone, their
payments were short by $2790. They failed to make any payment
in January. Assuming the trial period continued in January,
they were required to pay another $1860 on January 1, 2010,
making a total of $4650 then due and owing.
On January 20, 2010, the bank sent Arias a letter informing
him that the bank had not received all of the required TPP
payments, and had not received certain required financial
documentation. The letter gave him until thirty days from the
date of the letter or January 31, 2010 "whichever is later," to
make the required payments and submit the missing documents,
failing which he would "not receive a Home Affordable
Modification."
10 A-4599-12T1
Thus, arguably, the letter extended the trial period to
February 20, 2010. The bank's records show that on February 16,
2010, plaintiffs submitted a payment of $3720, which was not
even equivalent to what they owed as of January 1, 2010.
Indeed, by February 1, plaintiffs owed yet another $1860,
bringing the total they owed to $6510.
On April 27, 2010, the bank sent Arias a letter notifying
him that his loan was "not eligible for a Home Affordable
Modification" because he "did not make all of the required Trial
Period Plan payments by the end of the trial period." Even
assuming that the TPP had been extended to February 20, 2010,
the April 27, 2010 notice was entirely correct. Plaintiffs had
engaged in a pattern of non-payment and inadequate payment which
constituted a breach of the TPP Agreement and justified the bank
in refusing to give them a loan modification.6 On these facts,
we find neither a breach of contract nor a breach of the duty of
good faith and fair dealing. The duty of good faith and fair
dealing "does not 'alter the terms of a written agreement.'"
6
We are unimpressed with plaintiffs' reliance on unpublished
opinions involving debtors who faithfully made their TPP
payments but were denied a loan modification. Plaintiffs
attempt to gloss over their breach of the Agreement, contending
that they made payments after receiving the April 27 letter
denying them a loan modification. However, even after being
denied a loan modification, they had a continuing obligation to
pay the mortgage and the bank had a right to accept those
payments.
11 A-4599-12T1
Glenfed Fin. Corp. v. Penick, 276 N.J. Super. 163, 175 (App.
Div. 1994) (citation omitted), certif. denied, 139 N.J. 442
(1995). Consequently, we affirm the order on appeal.
Affirmed.
12 A-4599-12T1