Feb 13 2015, 9:22 am
ATTORNEY FOR APPELLANT ATTORNEYS FOR APPELLEE
Gregory W. Black David J. Jurkiewicz
Gregory W. Black, P.C. Nathan T. Danielsom
Plainfield, Indiana Bose McKinney & Evans, LLP
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Tracey M. Jaffri, February 13, 2015
Appellant-(Defendant/Counterclaim Court of Appeals Cause No.
32A01-1405-MF-236
Plaintiff Below),
Appeal from the Hendricks Superior
Court
v. Cause No. 32D02-1006-MF-102
The Honorable David H. Coleman,
JPMorgan Chase Bank, N.A., Judge
Appellee-(Plaintiff/Counterclaim
Defendant Below).
Barnes, Judge.
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Case Summary
[1] Tracey Jaffri appeals the trial court’s dismissal of her counterclaims against JP
Morgan Chase Bank, N.A. (“Chase”), filed in response to Chase’s mortgage
foreclosure action. We affirm.
Issue
[2] The restated issue before us is whether the trial court properly dismissed Jaffri’s
counterclaims alleging Chase had acted improperly in failing to modify her
mortgage after she went into default.1
Facts
[3] The facts as alleged by Jaffri are that in 2006, she purchased a home in
Hendricks County through a mortgage and promissory note that eventually
came into Chase’s possession. After losing her job and subsequently becoming
disabled in 2009, Jaffri fell behind on her mortgage payments. Jaffri and Chase
then entered into discussions regarding possible modification of her mortgage
terms under the federal government’s Home Affordable Modification Program
(“HAMP”), which was established in 2009 to help those in default on their
mortgage to avoid foreclosure. Those discussions were not successful, despite
1
Because of our resolution of this issue, we need not address Jaffri’s claim that the trial court improperly
denied her request for a jury trial.
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Jaffri’s contention that she was eligible for a HAMP modification and that she
made multiple applications to participate in the program.
[4] On June 18, 2010, Chase filed a complaint to foreclose Jaffri’s mortgage. On
January 19, 2011, Jaffri filed an answer and two counterclaims, for breach of
contract and breach of good faith and fair dealing. On December 5, 2013, Jaffri
amended her counterclaims to allege negligence, breach of fiduciary duty,
constructive fraud, and intentional infliction of emotional distress against
Chase. Specifically, Jaffri alleged that Chase had failed to properly respond to
and process her multiple HAMP requests, causing her emotional distress.
[5] At some point, Chase and Jaffri did enter into a modification of her mortgage
terms, though it was not accomplished through HAMP, and Jaffri began
repaying her mortgage under that modification.2 On May 13, 2014, Chase’s
foreclosure complaint was dismissed upon its own motion. Jaffri elected to
proceed with her counterclaims, however.
[6] Chase moved to dismiss Jaffri’s counterclaims. The trial court granted Chase’s
motion to dismiss as to all four of Jaffri’s counterclaims, without prejudice.
Rather than attempt to amend her counterclaims, Jaffri has now appealed.
2
Jaffri alleges that the terms of the modification were less favorable to her than a HAMP modification would
have been, and also were less favorable than the original mortgage and promissory note.
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Analysis
[7] Chase obtained dismissal of Jaffri’s counterclaims via Indiana Trial Rule
12(B)(6), failure to state a claim upon which relief could be granted. “A motion
to dismiss for failure to state a claim tests the legal sufficiency of the claim, not
the facts supporting it.” Babes Showclub, Jaba, Inc. v. Lair, 918 N.E.2d 308, 310
(Ind. 2009). We review a trial court’s granting or denial of a motion based on
Trial Rule 12(B)(6) de novo. Id. “When reviewing a motion to dismiss, we
view the pleadings in the light most favorable to the nonmoving party, with
every reasonable inference construed in the nonmovant’s favor.” Id. We will
not affirm dismissal of a complaint for failure to state a claim upon which relief
can be granted unless it is clear on the face of the complaint that the
complaining party is not entitled to relief. Id. Conversely, “[w]e will affirm a
successful T.R. 12(B)(6) motion when a complaint states a set of facts, which,
even if true, would not support the relief requested in that complaint.” Morgan
Asset Holding Corp. v. CoBank, ACB, 736 N.E.2d 1268, 1271 (Ind. Ct. App. 2000).
A. Negligence
[8] We first address dismissal of Jaffri’s counterclaim against Chase sounding
purely in ordinary negligence. To establish a negligence claim, a plaintiff must
allege and prove: “‘(1) a duty owed to the plaintiff by the defendant, (2) a
breach of the duty, and (3) an injury proximately caused by the breach of
duty.’” Yost v. Wabash College, 3 N.E.3d 509, 515 (Ind. 2014). (quoting Pfenning
v. Lineman, 947 N.E.2d 392, 398 (Ind. 2011). A defendant cannot be found
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negligent where there is no duty to the plaintiff. Id. “Whether a duty exists is
generally a question of law for the court.” Id.
[9] Jaffri’s negligence counterclaim specifically alleges, “[Chase] owed Ms. Jaffri a
duty to service her mortgage loan with reasonable care and to address her
HAMP modification applications with reasonable care.” App. p. 50. This
allegation seems to assert that Chase should be held liable in negligence for
failing to perform its contractual duties in a reasonable manner. Jaffri also
seems to claim entitlement to two different kinds of damages: pecuniary
damages related to obtaining a loan modification that was less favorable than
the terms available through a HAMP modification, and emotional distress
damages related to the strain caused by Chase’s dilatory conduct.
[10] To the extent Jaffri is claiming pecuniary harm caused by Chase’s conduct, we
note that the relationship between Jaffri and Chase is based on contract. Our
supreme court has held, “[w]hen the parties have, by contract, arranged their
respective risks of loss, . . . the tort law should not interfere.” Greg Allen Const.
Co. v. Estelle, 798 N.E.2d 171, 175 (Ind. 2003). In other words, “[t]he rule of
law is that a party to a contract or its agent may be liable in tort to the other
party for damages from negligence that would be actionable if there were no
contract, but not otherwise.” Id. Unless there is evidence of an independent
tort that would have existed if there was no contract between the parties, they
“should not be permitted to expand that breach of contract into a tort claim
against either the principal or its agents by claiming negligence as the basis of
the breach.” Id. at 173. In essence, that is what Jaffri has done here: attempted
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to claim that Chase negligently breached its contract with her. That is not an
actionable claim. See also Comfax Corp. v. North American Van Lines, Inc., 587
N.E.2d 118, 123-24 (Ind. Ct. App. 1992) (declining to recognize a new claim in
Indiana for tortious breach of contract).
[11] With respect to Jaffri’s claim to damages for emotional distress, it is well-settled
that emotional distress damages are not recoverable for breach of contract.
Tucker v. Roman Catholic Diocese of Lafayette-In-Indiana, 837 N.E.2d 596, 601
(Ind. Ct. App. 2005). As for any suggested claim of negligent infliction of
emotional distress by Jaffri, her complaint fails to state the necessary elements
of such a claim: that she sustained emotional trauma as the result of a direct
physical impact or by witnessing or coming up the scene of the death or severe
injury of a loved one. See id. at 602. Jaffri’s negligence counterclaim fails to
state any basis upon which she could have been granted relief under that theory,
and the trial court properly dismissed it.
B. Breach of Fiduciary Duty/Constructive Fraud
[12] Next, we jointly address Jaffri’s counterclaims for breach of fiduciary duty and
constructive fraud. “A claim for breach of fiduciary duty requires proof of three
elements: (1) the existence of a fiduciary relationship; (2) a breach of the duty
owed by the fiduciary to the beneficiary; and (3) harm to the beneficiary.”
Farmers Elevator Co. of Oakville v. Hamilton, 926 N.E.2d 68, 79 (Ind. Ct. App.
2010). The elements of constructive fraud are:
“(i) a duty owing by the party to be charged to the complaining party
due to their relationship; (ii) violation of that duty by the making of
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deceptive material representations of past or existing facts or
remaining silent when a duty to speak exists; (iii) reliance thereon by
the complaining party; (iv) injury to the complaining party as a
proximate result thereof; and (v) the gaining of an advantage by the
party to be charged at the expense of the complaining party.”
Yeager v. McManama, 874 N.E.2d 629, 641 (Ind. Ct. App. 2007) (quoting Rice v.
Strunk, 670 N.E.2d 1280, 1284 (Ind. 1996)).
[13] This court has directly held that in breach of fiduciary duty and constructive
fraud cases, “the parties cannot rely on a contractual relationship to create a
duty. Contractual agreements do not give rise to a fiduciary relationship
creating a duty.” Morgan Asset Holding Corp. v. CoBank, ACB, 736 N.E.2d 1268,
1273 (Ind. Ct. App. 2000). More specifically, “the mere existence of a
relationship between parties of bank and customer or depositor does not create
a special relationship of trust and confidence.” Wilson v. Lincoln Fed. Sav. Bank,
790 N.E.2d 1042, 1046 (Ind. Ct. App. 2003). Additionally, “mortgages do not
transform a traditional debtor-creditor relationship into a fiduciary relationship
absent an intent by the parties to do so. Absent special circumstances, a lender
does not owe a fiduciary duty to a borrower.” Id. at 1047; see also Huntington
Mortgage Co. v. DeBrota, 703 N.E.2d 160, 167-68 (Ind. Ct. App. 1998) (holding
mortgage company had no duty to disclose information regarding private
mortgage insurance cancellation to borrowers and, therefore, could not be liable
to borrowers on claims of breach of fiduciary duty and fraudulent
concealment).
[14] Here, Jaffri has failed to allege that there was anything “special” about her
relationship with Chase that imposed a fiduciary duty upon it with respect to
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negotiating a modification of the mortgage. Although Chase undoubtedly was
the more sophisticated party in this scenario, that fact alone has never been held
to be enough to form the basis of a breach of fiduciary duty or constructive
fraud with regard to a bank or mortgage company’s handling of a debt. See id.
Jaffri failed to state any basis upon which she could have been granted relief
under a claim of breach of fiduciary duty or constructive fraud, and the trial
court properly dismissed those counterclaims.
C. Intentional Infliction of Emotional Distress
[15] Finally, we address Jaffri’s counterclaim for intentional infliction of emotional
distress (“IIED”). Unlike the other three counterclaims Jaffri filed, a plaintiff
filing an IIED claim need not allege that the defendant owed the plaintiff a
duty. Rather, the elements of IIED require proof that the defendant: (1)
engaged in extreme and outrageous conduct (2) which intentionally or
recklessly (3) caused (4) severe emotional distress to another. Curry v. Whitaker,
943 N.E.2d 354, 361 (Ind. Ct. App. 2011). “The requirements to prove this tort
are ‘rigorous.’” Id. (quoting Cullison v. Medley, 570 N.E.2d 27, 31 (Ind. 1991)).
[16] The requirements to establish a claim of IIED have been described as follows:
“The cases thus far decided have found liability only where the
defendant’s conduct has been extreme and outrageous. It has not been
enough that the defendant has acted with an intent which is tortious or
even criminal, or that he has intended to inflict emotional distress, or
even that his conduct has been characterized by ‘malice,’ or a degree of
aggravation which would entitle the plaintiff to punitive damages for
another tort. Liability has been found only where the conduct has
been so outrageous in character, and so extreme in degree, as to go
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beyond all possible bounds of decency, and to be regarded as
atrocious, and utterly intolerable in a civilized community. Generally,
the case is one in which the recitation of the facts to an average
member of the community would arouse his resentment against the
actor, and lead him to exclaim, ‘Outrageous!’”
Bradley v. Hall, 720 N.E.2d 747, 752-53 (Ind. Ct. App. 1999) (quoting
RESTATEMENT (SECOND) OF TORTS § 46, cmt.). Whether “extreme and
outrageous” conduct has occurred depends, in part, upon prevailing cultural
norms and values. Id. If a complaint fails to contain sufficient factual
allegations that the defendant intended to emotionally harm the plaintiff, the
complaint may be dismissed for failure to state a claim upon which relief can be
granted. See Tucker, 837 N.E.2d at 603.
[17] Even if everything occurred that Jaffri alleges—that Chase intentionally
mishandled her HAMP applications and thereby caused her emotional
distress—such facts would not establish an IIED claim. The unfortunate fact is
that losing one’s job and then facing foreclosure is stressful no matter the
circumstances. Before HAMP was enacted, Jaffri’s options for remaining in her
home would have been even more limited than with the program in place. We
are hard-pressed to say that any mishandling of this new program—even if
intentional—constitutes the type of beyond-the-pale, “outrageous” conduct that
may be covered by an IIED claim. As such, the trial court properly dismissed
Jaffri’s IIED counterclaim for failure to state a claim upon which relief could be
granted.
[18] We conclude by noting that one of Jaffri’s main contentions is, “[Chase] . . .
intentionally did not dedicate the resources to HAMP modifications that were
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necessary to properly comply with the federal program.” App. p. 48. If there
was a violation of federal law with respect to Chase’s handling of Jaffri’s
HAMP requests, that is a matter better addressed by the U.S. Treasury
Department as the administrator of that program. We cannot perceive that by
enacting HAMP, the federal government intended for persons rejected for
HAMP assistance to have a private cause of action against the mortgage lender
or servicer, unless a contract actually was entered into under HAMP. A
number of cases have been decided to that effect. See, e.g., Spaulding v. Wells
Fargo Bank, N.A., 714 F.3d 769 (4th Cir. 2013) (holding that mortgage
company’s agreement to participate in HAMP did not establish duty owed to
mortgagee seeking mortgage modification and affirming dismissal of complaint
against mortgage company that failed to offer HAMP modification for breach
of implied contract, negligence, negligent misrepresentation, fraud, and
violation of state consumer protection laws); Wigod v. Wells Fargo Bank, N.A.,
673 F.3d 547 (7th Cir. 2012) (holding that although mortgagee had viable
claims against mortgage company that had entered into a temporary HAMP
contract with the mortgagee but then failed to abide by that contract, mortgage
company had no duty apart from contract to hire responsible and competent
personnel to manage mortgagee’s home loan); Markle v. HSBC Mortgage Corp.,
844 F. Supp. 172, 184-85 (D. Mass. 2011) (holding that bank’s participation in
HAMP did not establish a duty of care owed to mortgagee seeking
modification); Clay v. First Horizon Home Loan Corp., 392 S.W.3d 72 (Tenn. Ct.
App. 2012) (holding HAMP guidelines did not provide borrowers denied
modification with a private right of action for alleged failure to comply with
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guidelines) (quoting Marks v. Bank of America, N.A., 03: 10-CV08039PHXJAT,
2010 WL 2572988 (D. Ariz. June 22, 2010)). Jaffri’s counterclaims are
contrary to a wealth of authority refusing to allow mortgagees to file private
rights of action against a bank that allegedly failed to comply with HAMP.
Conclusion
[19] None of Jaffri’s counterclaims against Chase stated any actionable claim, and
the trial court properly granted Chase’s motion to dismiss all of them. We
affirm.
[20] Affirmed.
Friedlander, J., and Pyle, J., concur.
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