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Duffy v. Wells Fargo Bank, N.A.

United States District Court, D. New Jersey

May 31, 2017

JOHN DUFFY AND KAREN DUFFY, Plaintiffs,
v.
WELLS FARGO BANK, N.A., Defendant.

          OPINION

          Hon. Freda L. Wolfson United States District Judge.

         Plaintiffs John Duffy (“Mr. Duffy”) and his wife, Karen Duffy (“Karen” or “Ms. Duffy”) (collectively, “Plaintiffs”), filed this Complaint against Wells Fargo Bank, N.A. (“Defendant” or “Wells Fargo”), in which they assert various state and federal claims arising from an underlying state foreclosure proceeding that resulted in a final judgment issued against Plaintiffs. In lieu of an answer, Defendant moves for dismissal, under both Federal Rule of Civil Procedure 12(b)(1) and 12(b)(6), arguing that Plaintiffs' claims are precluded by, inter alia, the Rooker-Feldman doctrine. Alternatively, Defendant moves to dismiss the Complaint on the basis that Plaintiffs have failed to sufficiently plead facts in support of their claims. For the reasons set forth below, Defendant's Motion to Dismiss is GRANTED with respect to Counts Four through Eight, as these claims are precluded by Rooker-Feldman; however, the Motion is DENIED with respect to Counts One and Two.

         BACKGROUND

         On June 30, 2010, Mr. Duffy and his sister, Catherine Duffy (collectively the “Duffys”), entered into a $309, 320.00 Note with WCS Lending, LLC (“WCS”), a Florida Limited Liability Company. Certification of Aaron M. Bender, Esq. (“Bender Cert.”), Ex. A. The Duffys, on that same day, also entered into a Purchase Money Mortgage (the “Mortgage”) with Mortgage Electronic Registrations Systems, Inc. (“MERS”), as nominee for WCS. Bender Cert., Ex. B. The Mortgage was secured by the property located at 134 Waterworks Road, Freehold, New Jersey 07728 (the “Property”), which was co-owned by the Duffys. Bender Cert., Ex. B.

         On March 23, 2012, MERS assigned the Mortgage to Wells Fargo, and the transaction was recorded in the Monmouth County Clerk's Office. Bender Cert., Ex. C. As a result of encountering financial difficulties, the Duffys were unable to make payments on the Mortgage, thereby causing it to enter default. Bender Cert., Ex. D. In turn, on November 19, 2012, Wells Fargo filed a foreclosure complaint against the Duffys in the Monmouth County Superior Court, wherein Wells Fargo sought to repossess and sell the Property in an attempt to satisfy the remaining balance due on the Mortgage. Bender Cert., Ex. D. These facts are not in dispute.

         On September 23, 2013, Catherine Duffy purportedly transferred her entire interest in the Property to Mr. Duffy through a Quitclaim Deed. Compl. ¶ 18, Ex. B. According to Plaintiffs, Catherine Duffy became estranged from her brother. Shortly thereafter, on October 11, 2013, Plaintiffs, Mr. Duffy and his wife, Karen, filed a loss mitigation application (the “Application”), in which Plaintiffs solely provided their own personal and financial information; however, Wells Fargo denied the Application, as it did not include Catherine Duffy's signature. Compl. ¶¶ 19-22. On February 24, 2014, Plaintiffs appealed the denial, on the basis that Catherine Duffy was “estranged, unemployed, and residing in Mexico, ” and requested that Wells Fargo approve their loss mitigation application, despite the absence of Catherine Duffy's signature. Compl. ¶ 23, Ex. C.

         Thereafter, on April 1, 2014, Wells Fargo, in a letter addressed to “JOHN DUFFY” and “CATHERINE V DUFFY, ” informed the Duffys that they were approved for a Home Affordable Modification (“HAMP”) Trial Period Plan (the “TPP”): “Based on our telephone conversation and the financial information you provided, we would like to offer you an [FHA HAMP TPP].” Compl., ¶ 25, Ex. D.[1] In order to accept the terms and conditions of the TPP, the letter instructed that the Duffys must comply with the instructions provided therein: “To accept this offer . . . please send in your first monthly trial period payment.[2] Also, please sign and return a copy of the ‘FHA HAMP Trial Plan Terms and Conditions' document that is enclosed in this package.” Compl., ¶ 25, Ex. D. Plaintiffs assert that they agreed to be bound by the TPP, because they performed its terms by submitting the monthly trial payments thereunder. Compl., ¶ 28.

         On August 20, 2014, Wells Fargo sent Plaintiffs a Loan Modification Agreement (“Final Agreement 1”). Compl., ¶ 29. The Final Agreement was intended to amend and supplement the Mortgage, and it contained various signature lines under which the names “John Duffy” and “Karen Duffy” were displayed. Compl. ¶ 29, Ex. E. The Final Agreement was signed by Plaintiffs, and allegedly returned to Wells Fargo; however, Wells Fargo maintains that there was an error in the execution of Final Agreement 1. As a result, on January 12, 2015, Plaintiffs signed an identical Agreement (“Final Agreement 2”), which, according to Wells Fargo, was also executed incorrectly. Compl. ¶¶ 32-36. Plaintiffs allege that they were then presented with a new agreement requiring, for the first time, the signature of Catherine Duffy (“Final Agreement 3”). Compl. ¶¶ 38-39. However, Plaintiffs did not return Final Agreement 3 because it required the signature of Catherine.

         On July 28, 2015, in a letter addressed to the Duffys, Wells Fargo denied the Loan Modification Agreement, because it was not signed by Catherine: “At this time, you do not meet the requirements of this program because . . . we have not received your signed modification agreement.” Compl. ¶ 52, Ex. F. On August 17, 2015, Plaintiffs, once again, filed an appeal of denial, wherein they maintained that Plaintiffs performed under the TPP, and entered into a Final Agreement with Wells Fargo. Compl., ¶¶ 53-54. Thereafter, on May 12, 2016, Wells Fargo informed Plaintiffs that the appeal was still under investigation. According to Plaintiffs, Wells Fargo did not render a decision in response to the appeal; rather, they were instructed by Wells Fargo to file a new loss mitigation application. On May 17, 2016, Plaintiffs resubmitted a loss mitigation application, which Wells Fargo denied on the following day. Compl. ¶¶ 58, 61, Ex. I. During the pendency of Plaintiffs' last appeal to Wells Fargo, the State Court, on November 19, 2015, granted Wells Fargo's application for final judgment in the foreclosure action. Bender Cert., Ex. F. On July 25, 2016, after the initiation of this suit, Plaintiffs filed a motion to stay the state court's final judgment of foreclosure, in which they claimed: “Wells Fargo has refused to honor the agreed-upon terms of a signed loan modification agreement. [Plaintiffs] have filed a federal lawsuit against Wells Fargo in the District Court of New Jersey and are requesting a stay of the sale to provide an opportunity to have the matter settled.” Supplemental Certification of Aaron M. Bender, Esq., Ex. A.[3]

         On July 22, 2016, Plaintiffs filed this instant eight-count Complaint[4] against Wells Fargo. Under the first two Counts of the Complaint, Plaintiffs assert claims under the Real Estate Settlement Procedure Act (“RESPA”). Specifically, in Count One, Plaintiffs allege that Wells Fargo acted in violation of 12 C.F.R. § 1024.41(e) by “unilaterally and wrongfully deem[ing Plaintiffs] to have rejected the HAMP permanent modification agreement . . . despite the fact that [Plaintiffs] had made any necessary payments in compliance with the terms of the TPP and properly executed and returned [Final Agreement 1 and Final Agreement 2] . . . . ” Compl. ¶ 80-81. In Count Two, Plaintiffs also allege that Wells Fargo acted in violation of 12 C.F.R. § 1024.41(h) by failing “to provide a response to [Plaintiffs'] Appeal within the thirty (30) day timeframe, ” as is required under RESPA. ¶ 98.

         In Count Four, Plaintiffs bring a claim under the New Jersey Consumer Fraud Act (“NJCFA”). Specifically, Plaintiffs allege that Wells Fargo acted in violation of the NJCFA “by engaging in an unfair and deceptive act or practice by using fraud, deception, and misrepresentation . . . . ” Compl. ¶ 110. As an example of such fraudulent behavior, Plaintiffs assert that Wells Fargo “wrongfully denied the HAMP Final Modification to which [Plaintiffs] were entitled and under which they had dutifully performed so as to move towards foreclosure on [Plaintiff's] home, or in the alternative to collect payments under the trial plan under false pretense.” Compl., ¶ 110.

         In Count Five, Plaintiffs assert a claim for breach of contract. In that claim, Plaintiffs allege that Wells Fargo “offered [Plaintiffs] a final HAMP loan modification by and through the issuance of Final Agreement #1, ” which [Plaintiffs] accepted by signing and returning the Agreement to Wells Fargo. Compl. ¶¶ 122-123. However, Plaintiffs claim the Agreement was breached when Wells Fargo “sought to alter the terms of Final Agreement #1, and #2 for that matter, by requiring [, for the first time, ] Catherine's signature.” Compl. ¶ 124. Relatedly, in Count Six, Plaintiffs allege a violation of the covenant of good faith and fair dealing, because, in breaching the terms of the Agreement, Wells Fargo “acted in bad faith, dishonestly, and with improper motive to injure the rights of Plaintiffs.” Compl. ¶ 131.

         In Count Seven, Plaintiffs bring a claim of estoppel, alleging that because Wells Fargo “voluntarily engaged in conduct with the intention that it would be acted upon by [Plaintiffs] or under such circumstances that a reasonably prudent person would suppose that it was intended to be acted upon as true.” Compl., ¶ 135. In support, Plaintiffs allege that Wells Fargo “induced [Plaintiffs] into making temporary modification payments while [Wells Fargo] had no intention of accepting and engaging [Plaintiffs] in long term loss mitigation plan and without any good faith efforts to reach a permanent loan modification.” Compl., ¶ 138.

         Finally, in Count Eight, Plaintiffs assert a claim of common law fraud against Wells Fargo. Specifically, Plaintiffs allege that “[t]he misrepresentation knowingly made by [Wells Fargo], namely that Catherine's signature would not be needed on the HAMP permanent agreement, caused [Plaintiffs] to make TPP payments to [Wells Fargo], ” and, as a result, Plaintiffs suffered damages. Compl., ¶ 144-147.

         On December 11, 2016, Defendant filed the instant motion to dismiss, in which they argue that Plaintiffs' Complaint is barred by the Rooker-Feldman Doctrine, Younger Abstention Doctrine, Colorado River Abstention Doctrine, the New Jersey Entire Controversy Doctrine, res judicata, and collateral estoppel. According to Defendants, Plaintiffs bring this action in an attempt to re-litigate the foreclosure action in state court, which was already decided in favor of Defendant. In the alternative, Defendants seek to dismiss the Complaint on the basis that Plaintiffs have failed to allege facts in support of their claims. In their Opposition, Plaintiffs argue that their claims are not barred, because they are not requesting this Court to overturn the validity of the foreclosure action; rather, Plaintiffs seek an award of damages, which, if granted, would not ...


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