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In re Barbara Wigley

Summarizing by Bradley Pearce

Anthony Taylor v. JPMorgan Chase Bank

Case Type:
Case Status:
17-3019 (7th Circuit, Apr 30,2020) Published
The Seventh Circuit affirmed the District Court's decision.
Procedural context:
During the 2008 subprime mortgage crisis, Anthony Taylor (“Taylor”), fell behind on his mortgage payments and sought relief from his mortgage lender, JP Morgan Chase Bank, N.A. (“Chase”) through the Home Affordable Mortgage Program (“HAMP”). Taylor complied with his end of the application process, but Chase claimed that Taylor did not qualify for a loan modification under HAMP. Taylor then sued Chase, alleging that Chase failed to honor its offer to modify his loan under HAMP. Taylor represented himself and asserted claims for breach of contract and promissory estoppel. After removing the case to Federal Court, Chase moved for judgment on the pleadings under FRCP 12(c). After the parties began to brief the Motion, Taylor filed his own Motion seeking leave to amend his complaint, adding claims for fraud and intentional infliction of emotional distress. The District Court found that the facts alleged in both the initial and proposed amended complaint did not suffice to state a claim and thus granted judgment on the pleadings to Chase and denied Taylor’s request to amend. The key determination on the breach of contract claim, as concluded by the District Court, was Taylor’s failure to allege that Chase signed the TPP Agreement and failed to return a signed TPP Agreement to Taylor, which the District Court found to be unmet conditions precedent to Chase entering into the contract. The Seventh Circuit agreed and affirmed.
The HAMP program allowed “eligible” homeowners to reduce their monthly mortgage payments to hopefully avoid foreclosure. The first part of the process entailed the homeowner agreeing to a Trial Period Plan (“TPP”) with their lenders and making lower payments on a provisional basis. If the Borrower complied with the program during the TPP, the lender would then offer a permanent loan modification. Chase initiated this process by having a representative call Taylor and advise him that he prequalified for assistance under HAMP. After the call, Taylor received a package in the mail from Chase explaining the process in further detail. Within the fine print of these documents, Chase included language that it was not a guarantee that Taylor would qualify for HAMP. For instance, the proposed Trial Period Plan Agreement explicitly stated that that the Trial Period would not begin until both parties signed the TPP Agreement and Chase returned a fully-executed Agreement to Taylor. Furthermore, within the cover letter with the TPP documents, Chase explicitly stated that Taylor “may qualify” for a TPP, and that if he proved to be eligible for HAMP and complied with the TPP terms, Chase would permanently modify his loan. It also stated in a “Frequently Asked Questions” pamphlet that if Taylor did not qualify, the first TPP payment would be applied to his existing loan in accordance with the terms of his loan documents. Taylor completed and signed the TPP Agreement and submitted it to Chase along with the requisite financial documents. After his submission, he never received the signed TPP Agreement from Chase. Instead, Chase sent Taylor multiple notices about issues with his application. Taylor resubmitted what he believed to be the necessary documents and continued making the TPP payments. After the TPP ended and Taylor did not receive the permanent loan modification, he filed suit against Chase. Given the early stage of litigation in which this case was dismissed, the District Court and Seventh Circuit appeared to rely heavily upon the documents and limited facts from Taylor, such as communications with multiple representatives with Chase regarding his eligibility under HAMP. Within its analysis, both the District Court and Seventh Circuit found that in both the initial complaint and proposed amendment, Taylor failed to allege the existence of a binding agreement with Chase. Specifically, they found that language in the Agreement requiring Chase to execute and return the Agreement were both conditions precedent to Chase entering into the contract. Since those conditions were unmet no contract came into existence. While Taylor argued that Chase waived those conditions by accepting his TPP payments and having its representatives state that they “did not know of” Chase ever returning the executed TPP Agreement, both the District Court and Seventh Circuit disagreed and relied again upon the specific language in the TPP documents. They also used this finding as the rationale for denying Taylor’s other claims (promissory estoppel, fraud, and intentional infliction of emotional distress). In conclusion, the District Court and Seventh Circuit’s found that Chase’s communications with Taylor were broadly conditional and never met the threshold for either a written or oral contract regarding a potential loan modification with Taylor under HAMP. It should be noted, due to the conflict of law in the 8th and 9th Circuit on this issue, that Judge Hamilton’s dissent was critical of Chase and found that Taylor alleged sufficient facts to support a viable claim for breach of contract and promissory estoppel. He went so far as to note that he believed Chase to be “incompetent” when it came to HAMP, denying 84 percent of its applicants, and denying permanent loan modifications in most cases. Thus, in a lengthy and scorching dissent, he essentially found that “Chase argues, and the majority opinion accepts, that one sentence in the fine print of the HAMP documents nullified Chase’s obligations and promises.” Justice Hamilton believed there was no basis for Chase to have denied Taylor’s application and that relevant case law from the 8th and 9th Circuit appear to conflict with the majority’s opinion.
Sykes, Hamilton, Scudder

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