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GMAC Mortgage, LLC v. Willoughby

Supreme Court of New Jersey

July 31, 2017

GMAC MORTGAGE, LLC, Plaintiff-Respondent,
TAMILYNN WILLOUGHBY, Defendant-Appellant.

          Argued March 21, 2017

         On certification to the Superior Court, Appellate Division.

          Joshua W. Denbeaux argued the cause for appellant (Denbeaux & Denbeaux, attorneys).

          Andrew P. Zacharda argued the cause for respondent (Tompkins, McGuire, Wachenfeld & Barry, attorneys).

          Linda E. Fisher argued the cause for amici curiae Seton Hall Law Center for Social Justice, New Jersey Citizen Action, La Casa de Don Pedro, and the Housing and Community Development Network of New Jersey (Seton Hall University School of Law, Center for Social Justice, and Jurow & Schore, attorneys; Linda E. Fisher, Kevin B. Kelly, Rebecca Schore, and Margaret Lambe Jurow, on the briefs).

          ALB IN, J., writing for the Court.

         In this appeal, the Court determines whether a loan modification agreement, entered into through the medium of the Judiciary's Residential Mortgage Foreclosure Mediation Program, was a permanent or provisional agreement.

         In February 2006, defendant TamiLynn Willoughby obtained a mortgage from plaintiff GMAC Mortgage, LLC (GMAC), which she defaulted on in June 2006. GMAC filed a foreclosure complaint and obtained a final judgment, and a Sheriff's sale of the property was scheduled for September 2009. The chancery court granted Willoughby's motion to stay the sale and permitted the parties to participate in New Jersey's Residential Mortgage Foreclosure Mediation Program, which was implemented by this Court in response to the economic crisis that resulted from the collapse of the housing market. The Program was intended to provide a neutral forum where parties could attempt to reach mutually agreeable terms for restructuring loans in order to avoid foreclosures and bring finality to disputes.

         In May 2010, Willoughby and GMAC reached an agreement, which was memorialized in a "Foreclosure Mediation Settlement Memorandum, " a form document provided by the Judiciary. GMAC's attorney handwrote the terms of the Agreement into the blank section of the memorandum, including that Willoughby was "being offered a trial to permanent modification plan contingent on signed modification documents and an initial down payment." Per the terms of the Agreement, Willoughby would pay a $6000 down payment by June 7, 2010, followed by monthly payments of $1678.48. In the event all trial payments were made, GMAC agreed to "make modification permanent, " but if Willoughby missed any payments, it would continue with the foreclosure. The parties agreed that the Agreement was "final, binding and enforceable[.]" The mediator then filed a "Foreclosure Mediation Completion Report, " checking off that the Agreement was a "Provisional Settlement - No Need to Reschedule Mediation (Case Not Dismissed)" and "Loan Modification."

         Willoughby paid the down payment and proceeded to make monthly payments of $1678.48 through June 1, 2011. On June 7, 2011, GMAC's loan servicing agent sent Willoughby a new loan modification agreement with different terms, including increased monthly payments of $ 1814.52. Willoughby did not sign the new agreement, but began making the increased payments. In December 2011 and May 2012, Willoughby received two more modification agreements with slightly different terms, which she did not accept. On August 20, 2012, GMAC returned her monthly payment and advised that the loan would be referred to foreclosure because she failed to sign the May 2012 agreement. Willoughby had made $58, 790.69 in payments under the May 2010 Agreement.

         Willoughby moved to enforce the May 2010 Loan Modification Agreement. The chancery court ordered the parties to return to mediation, where GMAC offered a "Provisional Settlement Agreement" with new terms, including a $3630 down payment and monthly payments of $ 1805. Willoughby paid the down payment and verbally indicated that she accepted GMAC's terms, but she did not execute the loan modification documents and GMAC revoked the offer. The chancery court denied Willoughby's motion to enforce the May 2010 Agreement, finding that it was a "provisional settlement" as evidenced by Willoughby's submission to subsequent mediation sessions. On November 4, 2013, her home was sold to GMAC at a Sheriff's sale for $100.

         In an unpublished opinion, the Appellate Division affirmed the chancery court's determination that the May 2010 Agreement was unenforceable. The panel determined that, because Willoughby never signed a permanent modification agreement, the parties never achieved a meeting of the minds for an enforceable agreement. The Court granted Willoughby's petition for certification. 227 NI 146 (2016).

         HELD: Willoughby satisfied all contingent terms of the May 2010 Agreement, rendering the Agreement permanent and binding. Despite being compelled to engage in subsequent mediations and negotiations in an effort to save her home, Willoughby did not voluntarily abandon the May 2010 Agreement. The chancery court should have granted her pro se motion to enforce the Agreement as a permanent loan modification.

         1. At its core, this is a contractual dispute, and, like all such disputes, the language of the agreement typically governs. In determining the meaning or validity of a contract, the Court's review is de novo. It looks at the contract with fresh eyes, giving a faithful and logical reading to the words chosen by the parties to the agreement. The issue here also implicates the Residential Mortgage Foreclosure Mediation Program, which mandates mediation in all cases in which homeowners, who occupy their residences, contest foreclosure actions. The Program is intended to lead to amicably mediated resolutions and not endless rounds of mediation or litigation, goals which can only be met if the chancery courts enforce mediated settlements, (pp. 13-16)

         2. The parties dispute whether the settlement was a provisional or permanent loan modification. Under principles of contract law, a valid settlement agreement requires an "offer and acceptance, " and terms that are sufficiently definite so that each party can, with reasonable certainty, ascertain the performance they must render. Although the agreement here is not entirely free from ambiguity, the terms are sufficiently definite and detailed to indicate, with reasonable certainty, that the parties intended a permanent loan modification. The Agreement stated that it was "a trial to permanent modification plan contingent" on signed documents and a down payment. It also stated that, if Willoughby made all trial payments, it would become permanent. Willoughby signed the documents, made the down payment, and made all the trial payments. The Agreement has all of the indicia of a permanent and binding agreement, and Willoughby relied on a reasonable interpretation of it in making payments to save her home. (pp. 16-19)

         3. Nothing in the Agreement suggested that, after twelve months, GMAC could unilaterally demand that Willoughby agree to a new loan modification on different terms or compel her to accept continued mediation sessions. Although Willoughby began making increased monthly payments, apparently fearing that GMAC would restart the foreclosure action, she did not sign any of the new loan modification agreements, ultimately looking to the courts for protection. When the chancery court did not enforce the Agreement and returned the case to mediation, the case went awry. Although Willoughby was compelled to proceed with mediations and negotiations in an effort to save her home, the record establishes that she never voluntarily abandoned the May 2010 Agreement, having not signed the documents necessary to execute a contract superseding it. (pp. 19-20)

         4. Through the medium of the Judiciary's Foreclosure Mediation Program, GMAC and Willoughby entered into a loan modification agreement, which provided that if Willoughby made all the trial payments, the Agreement would become permanent. Willoughby carried out her part of the bargain. The chancery court should have granted her pro se motion to enforce the agreement as a permanent loan modification. Moreover, the Mediation Program Completion Report should provide a check-off category entitled "Final Settlement (Case Not Dismissed)" in order to make clear the type of agreement reached here where the final settlement was contingent on the homeowner's completion of trial payments and where compliance with those terms would result in dismissal of the foreclosure action, (pp. 20-22)

         5. The Court remands to the chancery court to fashion, in its sound discretion, a suitable and equitable remedy. If Willoughby's home was sold to a bona fide, good faith purchaser, she is not entitled to specific performance. However, in the absence of specific performance, she is entitled to damages, if any, for breach of contract. In performing that calculation, the chancery court may consider all relevant facts, including the payments made by Willoughby under the May 2010 Agreement, insurance proceeds GMAC received for damage caused to Willoughby's home during Hurricane Sandy, and the time Willoughby spent in her home without making monthly payments, (pp. 22-23)

         The judgment of the Appellate Division is REVERSED, and the matter is REMANDED to the chancery court for proceedings consistent with this opinion.


          ALBIN JUSTICE.

         In November 2008, following the collapse of the housing market, this Court implemented a statewide Residential Mortgage Foreclosure Mediation Program to address the economic crisis that left many of our citizens facing the loss of their homes. The primary goal of the Mediation Program was to provide a neutral forum where homeowners and lenders could attempt to reach mutually agreeable terms for restructuring loans to avoid foreclosures. The Program was intended to bring finality to disputes, not to be a springboard for endless rounds of mediation and litigation. This appeal illustrates one case that eluded the beneficent purposes of the Program.

         After defaulting on her home loan with plaintiff GMAC Mortgage, LLC, defendant TamiLynn Willoughby entered into New Jersey's Foreclosure Mediation Program. The mediation process led to an agreement between GMAC and Willoughby that gave Willoughby a path to save her home through a "permanent modification" of the loan. The agreement, executed in 2010, set forth the required down payment and monthly payments, the unpaid principal balance, the amount in arrears, and the length and interest rate of the loan.

         Willoughby complied with that agreement, paying the down payment and each monthly installment for one year. Then, GMAC began sending Willoughby proposals differing from the 2010 agreement, which GMAC claimed was provisional. Willoughby moved to enforce the 2010 settlement agreement, but instead the chancery court ordered additional mediation sessions. Willoughby never accepted in writing any of GMAC s proposals to modify the original agreement. Protracted litigation ensued. Willoughby's efforts to enforce the 2010 settlement agreement proved fruitless, and GMAC's foreclosure action ended with a Sheriff's sale of Willoughby's home.

         Willoughby was denied relief by the chancery court, which held that the 2010 mediation agreement was "provisional" and not enforceable as a final settlement agreement. The Appellate Division affirmed.

         We now reverse and conclude that Willoughby and GMAC entered into an enforceable settlement agreement through the Foreclosure Mediation Program.

         The language of the 2010 mediation agreement -- much of it handwritten by GMAC s attorney -- spoke of a "permanent modification" that was final and binding. The specificity of the terms, including the length of the mortgage, did not suggest that the agreement was a temporary placeholder awaiting a final resolution. The 2010 mediation agreement was worded as a final settlement, not a prelude to further negotiations. Willoughby has endured years of litigation, ending with the loss of her home. She was entitled to the benefit of the agreement for which she had bargained.

         In light of the sale of Willoughby's home, we remand to the chancery ...

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