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Watson v. Wells Fargo Home Mortgage, Inc.

Supreme Court of Missouri, En Banc

August 19, 2014

SHELBY E. WATSON, Appellant,
v.
WELLS FARGO HOME MORTGAGE, INC., ET AL., Respondents

APPEAL FROM THE CIRCUIT COURT OF THE CITY OF ST. LOUIS. The Honorable Bryan L. Hettenbach, Judge.

Watson was represented by Mitchell B. Stoddard of Consumer Law Advocates in St. Louis.

Wells Fargo and Fannie Mae were represented by David T. Hamilton and John H. Kilper of Hazelwood & Weber LLC in St. Charles.

The attorney general was represented by Solicitor General James Layton and Bryan Bear of the attorney general's office in Jefferson City.

The National Consumer Law Center was represented by Dale K. Irwin and Gina Chiala of Slough Connealy Irwin & Madden LLC in Kansas City; Bernard E. Brown and Lee R. Anderson of The Brown Law Firm in Kansas City.

Mary R. Russell, Chief Justice. Breckenridge, Fischer, and Wilson, JJ., concur; Draper, J., concurs in part and dissents in part in separate opinion filed; Stith and Teitelman, JJ., concur in opinion of Draper, J.

OPINION

Page 405

Mary R. Russell, Chief Justice.

Shelby Watson appealed from the trial court's judgment in favor of Wells Fargo on her Missouri Merchandising Practices Act (MMPA), section 407.020[1] claim, in which she maintained Wells Fargo engaged in bad faith negotiations of a loan modification and wrongfully foreclosed on a deed of trust. The trial court held that since Wells Fargo's actions were not done before or at the time of the extension of credit in the original loan, and Wells Fargo was not an original party to that transaction, its actions were not " in connection with" the sale of the original loan.

Page 406

This case, like Conway v. Citimortgage Inc., 438 S.W.3d 410, (Mo. banc 2014) (No. SC93951), decided today, raises the issue of when the actions of a loan servicer who was not a party to the initial transaction are " in connection with" the initial sale of the loan. In Conway, it was determined that a plaintiff may state a claim under the MMPA against a loan servicer who was not a party to the initial transaction for the alleged wrongful foreclosure on a deed of trust.

Here, Watson alleged that Wells Fargo violated the MMPA in two ways: (1) wrongfully foreclosing on the deed of trust; and (2) engaging in bad faith negotiations of a loan modification, even though there was no obligation to renegotiate under the terms of the original loan. To the extent Watson's allegations relate to the wrongful foreclosure, summary judgment is not appropriate pursuant to Conway. However, because Wells Fargo was not enforcing the terms of the original loan when it negotiated the loan modification, its actions did not violate the MMPA as they were not " in connection with" the sale of the original loan. The trial court's judgment is affirmed in part and reversed in part, and the case is remanded.

Factual Background

To finance the purchase of a new home in 2006, Shelby Watson obtained a loan from Mortgage Resources in the Midwest that was secured by a deed of trust on the property. The deed of trust stated that Mortgage Resources was not under any obligation to renegotiate the ...


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