Justia Contracts Opinion Summaries

Plaintiff Blanca Gonzalez, and Monserate Diaz purchased a home as tenants in common. Diaz borrowed the downpayment from Cityscape Mortgage Corporation (Cityscape) and executed a note. Plaintiff did not sign the note. Plaintiff and Diaz secured that loan by mortgaging their home to Cityscape. Over time, Plaintiff fell behind on the payments and U.S. Bank obtained a foreclosure judgment. The trial court ordered that the home be sold to satisfy the judgment. Before the sheriffâs sale, Plaintiff entered into a written agreement with Defendant Wilshire Credit Corporation (Wilshire), U.S. Bankâs servicing agent. Plaintiff was represented by a Legal Services attorney who helped negotiate the agreement. Plaintiff missed four payments to Wilshire. A scheduled sheriffâs sale was cancelled when the parties entered into a second agreement. Plaintiff was contacted and dealt with directly; neither Wilshire nor U.S. Bank notified the Legal Services attorney. Although Plaintiff had not missed a single payment required by the second agreement, instead of dismissing the foreclosure action as promised, Wilshire sent a letter to Plaintiff noting that the second agreement was about to expire and that a new agreement needed to be negotiated to avoid foreclosure. Plaintiff contacted the Legal Services attorney. When the attorney questioned Wilshire, it could not explain how it had come to the arrears amount set in the second agreement, or why Plaintiff was not deemed current on the loan. Plaintiff filed a complaint alleging that Wilshire and U.S. Bank engaged in deceptive and unconscionable practices in violation of the CFA. The trial court granted summary judgment in favor of Wilshire and U.S. Bank, finding that the CFA did not apply to post-judgment settlement agreements entered into to stave off a foreclosure sale. The Appellate Division reversed and reinstated plaintiffâs CFA claim. Upon review, the Supreme Court held that the post-foreclosure-judgment agreements in this case constituted stand-alone extensions of credit. In fashioning and collecting on such a loan, a lender or its servicing agent cannot use unconscionable practices in violation of the CFA.

This action for breach of contract and related tort claims had its origin in a February 9, 2006 Credit and Security Agreement, wherein defendant agreed inter alia to provide plaintiff with a revolving line of credit. Plaintiff subsequently appealed from a judgment of dismissal entered by the district court, contending that the district court erred in relying on releases executed in favor of defendant, most recently in a forbearance agreement to dismiss its claims because its complaint pleaded that these releases were induced by economic duress. The court held that plaintiff failed to plead plausibly that defendant made a "wrongful threat," an essential element of economic duress. Rather, the conduct alleged to have caused duress evidences only the exercise of defendant's legal rights under the parties' original contract and subsequent agreements. Therefore, to the extent that those rights included defendant's exercise of "reasonable discretion" in various areas, plaintiff's allegations failed as a matter of law to plead actions exceeding the scope of such discretion. Accordingly, the court affirmed the judgement of dismissal.

Plaintiff, on behalf of himself and similarly situated individuals, brought an action against Chase, alleging that it increased his interest rates retroactively to the beginning of this payment cycle after his account was closed to new transactions as a result of a late payment to Chase or another creditor. The court had previously issued an opinion reversing the district court's dismissal of most of plaintiff's federal and state claims. However, Chase sought Supreme Court review of the court's decision and the Supreme Court reversed with respect to the federal claim and remanded for further proceedings. Consequently, the court withdrew its prior opinion and, consistent with the Supreme Court's ruling, affirmed the district court's dismissal of plaintiff's first cause of action under the Truth in Lending Act (TILA), 15 U.S.C. 1601-1615, for failure to notify of rate increase, as well as plaintiff's sixth cause of action for breach of contract for failure to notify him "of any change if required by applicable law." Although the Supreme Court's decision did not specifically address the court's ruling on plaintiff's state law claims, the court held: as Delaware law permitted the actions taken by Chase, the district court correctly concluded that plaintiff's second, third, and fourth state law causes of action were foreclosed; plaintiff's fifth cause of action failed to state a claim for consumer fraud under 6 Del. C. 2513(a); and plaintiff's seventh cause of action failed to state a claim for breach of an implied duty of good faith. Therefore, the court affirmed the judgment of the district court.

Central Mortgage Company (CMC) sued Morgan Stanley after mortgages for which CMC purchased servicing rights from Morgan Stanley began to fall delinquent during the early financial crisis of 2007. CMC subsequently appealed the dismissal of its breach of contract and implied covenant of good faith and fair dealings claims. The court held that the Vice Chancellor erroneously dismissed CMC's breach of contract claims on the basis of inadequate notice where CMC's pleadings regarding notice satisfied the minimal standards required at this early stage of litigation. The court also held that the Vice Chancellor erroneously dismissed CMC's implied covenant of good faith and fair dealings claim where the claims were not duplicative. Accordingly, the court reversed the Vice Chancellor's judgment dismissing all three of CMC's claims and remanded for further proceedings.

Deutsche Bank National Trust Company, as trustee in trust for the registered holders of Ameriquest Mortgage Securities, Inc., appealed from a summary judgment entered in the district court in favor of Donald and Kim Pelletier on the bank's complaint for foreclosure. The district court concluded that Deutsche Bank had failed to dispute facts asserted by the Pelletiers demonstrating that they had asserted a right of rescission. On appeal, the Supreme Court affirmed the grant of summary judgment, but because the district court's order reached only the point of determining that the Pelletiers were entitled to rescission, the Court remanded for further proceedings to effectuate the rescission.

This case arose when Associates First Capital Corporation (Associates) purchased integrated risk policies from Certain Underwriters of Lloyd's of London (Lloyd's), the primary insurer, and nine excess insurers. Pursuant to the integrated risk policies, Citigroup, Inc. (Citigroup), as successor-in-interest to Associates, timely notified the insurers of two actions filed within the policy period and made claims for coverage. Initially, all of the insurers denied coverage, but later, Lloyd's settled with Citigroup. After the parties filed motions for summary judgment, the district court dismissed Citigroup's claims for coverage. The court affirmed the denial of coverage and held that the plain language of the insurers' policies (Federal, Steadfast, S.R., and St. Paul) dictated that their coverage did not attach when Citigroup settled with Lloyd's and that Citigroup's claim against another insurer (Twin City) was time barred.

This case stemmed from the replevin actions filed by Klein Bank against debtors. Klein Bank appealed from the Orders of the Bankruptcy Court denying its motions to remand its replevin actions which had been removed from the state court to the bankruptcy court. In denying the motions, the Bankruptcy Court concluded that replevin actions were core proceedings. While this appeal was pending, the United States Supreme Court clarified that core proceedings were limited to those "arising under or arising in" a bankruptcy case. Based on that, the court now concluded that the matters involved in the replevin actions were not core proceedings. Accordingly, the court reversed and remanded to the Bankruptcy Court for further findings on the question of whether the court was required to abstain under 28 U.S.C. 1334(c)(2).

BAC Home Loans Servicing, LP (formerly known as Countrywide Home Loans Servicing, LP); Countrywide Home Loans of Texas, Incorporated; and Countrywide Home Loans, Incorporated appealed an order for remand where the district court dismissed the lone federal claim under the Truth in Lending Act (TILA), 15 U.S.C. 1601-1667f, and declined to exercise supplemental jurisdiction over the remaining state law claims. Defendants argued that this was an abuse of discretion because Countrywide Home Loans of Texas was improperly joined and thus the district court had diversity jurisdiction over the state law claims. Plaintiffs argued that there was no improper joinder and that defendants waived any right to argue improper joinder or the existence of diversity jurisdiction when they failed to remove the action to federal court within 30 days of service of the original complaint that listed Countrywide Home Loans of Texas. The court held that defendants carried their burden of proving improper joinder; the district court had jurisdiction over the state law claims at the time of remand; and the exercise of that jurisdiction was mandatory. Accordingly, the court reversed the district court's decision to remand the state law claims to Texas state court and remanded for further proceedings.

Plaintiff US Bank National Association appealed a trial court order that granted summary judgment to Defendant Homeowner Christine Kimball and dismissed with prejudice US Bankâs foreclosure complaint for lack of standing.  On appeal, US Bank argued that it had standing to prosecute the foreclosure claim and that the courtâs dismissal with prejudice was in error.  Homeowner cross-appealed, arguing that the court erred in not addressing her claim for attorneyâs fees. Homeowner purchased the property in question in June 2005.  To finance the purchase, she executed an adjustable rate promissory note in favor of Accredited Home Lenders, Inc. (Accredited).  The note was secured by a mortgage deed to Mortgage Electronic Registration Systems, Inc. (MERS) as nominee for Accredited. In 2009, US Bank filed a foreclosure complaint for Homeownerâs failure to make required payments.  The complaint alleged that the mortgage and note were assigned to US Bank by MERS, as nominee for Accredited.  Attached to the complaint was a copy of the instrument signed by a "Duly Authorized Agent" of MERS.  The promissory note was also attached to the complaint and appended to it was an undated allonge signed by a corporate officer of Accredited, endorsing the note in blank. Homeowner moved for summary judgment claiming, among other things, that US Bank failed to present sufficient evidence that it held homeownerâs note and corresponding mortgage. Because neither note submitted by US Bank was dated, the court concluded that there was no evidence that the note was endorsed to US Bank before the complaint was filed.  Therefore, the court held that US Bank lacked standing to bring the foreclosure action.  Following a hearing, the court denied the motions for reconsideration and to amend the complaint.  The court concluded that US Bank had submitted a defective complaint and the deficiencies were not mere technicalities, but essential items, without which the case could not proceed.  The court held that US Bank lacked standing when the complaint was filed, and dismissed the complaint âwith prejudice.â  Upon review of the trial record and briefs submitted by the parties, the Supreme Court affirmed the trial court's decision in all respects but for the 'with prejudice': "this may be but an ephemeral victory for homeowner.  Absent adjudication on the underlying indebtedness, the dismissal cannot cancel her obligation arising from an authenticated note, or insulate her from foreclosure proceedings based on proven delinquency." The Court dismissed the foreclosure complaint and remanded the case for consideration of the parties' fees dispute.

This case arose when elderly widow Dorothy Chase Stewart filed for bankruptcy in 2007 and Wells Fargo Bank filed a proof of claim with the bankruptcy court reciting debts owed from an outstanding mortgage on Ms. Stewart's house. The bankruptcy court subsequently found that Wells Fargo's mortgage claims exhibited systematic errors arising from its highly automated, computerized loan-administration program and issued an injunction requiring Wells Fargo to audit every proof of claim it had filed on or filed after April 13, 2007; to provide a complete loan history on every account and file that history with the appropriate court; and "to amend...proofs of claim already on file to comply with the principles established in this case and [In re] Jones." Wells Fargo appealed, challenging the claim amount and the injunction. The court vacated the injunction as exceeding the reach of the bankruptcy court. Because neither the injunction nor the calculation of Ms. Stewart's debt was properly before the court, the court dismissed as moot Wells Fargo's appeal of legal rulings underlying the bankruptcy court's interpretation of the mortgage.