Melissa Monday-West v. Wells Fargo Bank, N.A

Case Type:
Case Status:
20-6381 (6th Circuit, Nov 09,2022) Not Published
The U.S. Court of Appeals for the Sixth Circuit affirmed a district court's dismissal of tort claims under Kentucky law against Wells Fargo Bank, N.A. related to its wrongful denial of requests for a loan modification under the Home Affordable Mortgage Program (HAMP).
Procedural context:
The Wests sued Wells Fargo for fraud and for negligent and intentional infliction of emotional distress owing to the undisputed wrongful denial of their request for a loan modification under HAMP. (The Chapter 7 Trustee pursued the claims on behalf of the bankruptcy estate of Melissa Monday-West, and Ms. Monday-West pursued the claims as the Administratrix of the estate of Stanford Lynn West.) The U.S. District Court for the Eastern District of Kentucky granted Wells Fargo's motion to dismiss the claims under Federal Rule of Civil Procedure 12(b)(6). It concluded the complaint failed to plausibly allege the causation element of each claim. On appeal, the Sixth Circuit affirmed the dismissal on other grounds. The circuit court first concluded the complaint failed to allege Wells Fargo owed the Wests a duty to disclose sufficient to sustain the fraudulent omission claim under Kentucky law; the court explained that "the Wests point to no case law, and we have found none, supporting the idea that HAMP’s requirement that mortgagees offer loan modifications to borrowers who qualify gives rise to a statutory duty of disclosure on Wells Fargo to borrowers." Second, the court held the complaint did not allege Wells Fargo owed the Wests a duty of care "arising from a statute, common law, or a confidential or fiduciary relationship[;]" this was necessary because, to support a negligent infliction of emotional distress claim under Kentucky law, "a plaintiff must first prove the elements of a common law negligence claim[.]" Third, the Sixth Circuit held that the Wests' complaint did not "adequately allege the outrageous conduct element" of their intentional infliction of emotional distress claim under Kentucky law, and the claim lacked plausibility for that reason.
Wells Fargo participated in HAMP as a loan servicer. Using its own software to determine borrowers' eligibility for HAMP, rather than software provided by the Secretary of the Treasury, Wells Fargo repeatedly wrongfully denied mortgage modifications. After defaulting on two mortgage loans on their home in Lexington, Kentucky, Melissa Monday-West and Stanford Lynn West applied to Wells Fargo for a HAMP loan modification. Wells Fargo denied the Wests' first application and then initiated a state court foreclosure action against the Wests. While the state court action was pending, the Wests filed a second application for a HAMP loan modification and, again, Wells Fargo denied it. The Wests then filed a chapter 13 bankruptcy petition and proposed a plan, but Wells Fargo objected to its proposed treatment and the Wests were unable to confirm a plan. Thereafter, the Wests' bankruptcy case was bifurcated; Melissa Monday-West’s case was converted to chapter 7 and discharged, and Stanford West’s case was dismissed without a discharge. The foreclosure action proceeded to a judgment and a sale of the Wests' residence for nearly $209,000; Wells Fargo received just over $174,000 of the sale proceeds. Several years later, Wells Fargo wrote the Wests to advise it should have approved them for a HAMP modification. Wells Fargo sent the Wests a $15,000 check and offered to pay for a mediator to further resolve any issues. The Wests did not accept the proposed resolution and filed suit.

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