Gretsch v. Vantium Capital, Inc.

846 N.W.2d 424

Connie L. GRETSCH, Appellant,

v.VANTIUM CAPITAL, INC. d/b/a Acqura Loan Services, Respondent.

No. A12–2270.

Supreme Court of Minnesota.

April 2, 2014.

Rehearing Denied May 30, 2014.

Syllabus by the Court

1. Minnesota Statutes § 58.18, subd. 1 (2012), provides a borrower who is injured by a violation of the standards set forth in Minn.Stat. § 58.13 (2012) a private right of action for damages.

2. The federal Home Affordable Modification Program does not preempt Minn.Stat. § 58.18, subd. 1, and the lack of a federal cause of action to enforce the directives of HAMP does not prohibit a state from providing a cause of action to enforce those directives.

3. Minnesota Statutes § 58.18, subd. 1, does not violate the Contracts Clause of either the United States Constitution or the Minnesota Constitution because the statute was in force and effect when the contract was made, and therefore is part of the contract terms by implication.

Timothy L. Thompson, Housing Preservation Project, Saint Paul, MN; and Richard J. Fuller, and Bert Black, Schaefer Law Firm, LLC, Minneapolis, MN; and Randall Smith, Saint Paul, MN, for appellant.

Michael J. Steinlage, Paul Sand, Larson King, LLP, Saint Paul, MN, for respondent.

Prentiss Cox, University of Minnesota Law School, Minneapolis, MN, for amicus curiae University of Minnesota Law School Consumer Protection Clinic.

OPINION

GILDEA, Chief Justice.

Connie L. Gretsch filed a lawsuit against Vantium Capital, Inc. d/b/a Acqura Loan Services (“Acqura”) alleging numerous state common law and statutory claims. Gretsch's claims arise from Acqura's alleged violation of its Servicer Participation Agreement with Fannie Mae. Gretsch contends that Acqura violated the agreement by failing to follow guidelines applicable under the federal Home Affordable Modification Program. The sole issue on appeal is whether Minn.Stat. § 58.18, subd. 1 (2012), provides a private cause of action for Gretsch to pursue damages for Acqura's alleged violation of its agreement with Fannie Mae, an agreement to which Gretsch is not a party. The district court and court of appeals both held that Gretsch lacked standing. Because we conclude that Minn.Stat. § 58.18, subd. 1, provides for a private right of action and therefore gives Gretsch standing to pursue her claim, we reverse.

Before turning to the specific facts alleged here, we begin with a discussion of the statutory scheme that underlies those allegations. As part of the Emergency Economic Stabilization Act of 2008, Congress authorized the Troubled Asset Relief Program (“TARP”) and the Making Home Affordable program, which includes the Home Affordable Modification Program (“HAMP”). See12 U.S.C. §§ 5211, 5219 (2012). Under HAMP, non-government sponsored entities could voluntarily enter into a servicer participation agreement (“SPA”) with the federal government through Fannie Mae to participate in the program and receive financial incentives for modifying mortgages. The SPA governs the servicer's participation in HAMP for all of the servicer's mortgages. Under the SPA, the servicer is required to follow the HAMP program directives and guidelines. These directives include the requirement that the servicer consider a borrower's request for a HAMP modification and notify the borrower within 30 days of its decision and provide the specific reason for the decision. During the period in which the servicer is considering the borrower for HAMP eligibility, the servicer cannot refer the matter for foreclosure or proceed with any pending foreclosure. Dep't of Treasury, Making Homes Affordable Program, Handbook for Servicers of Non–GSE Mortgages 52–53 (3d ver.2010).

With this statutory scheme in mind, we turn to the specific facts alleged in this case.¹ Gretsch alleges in her complaint that she entered into a mortgage with Aegis Lending Corporation to finance the purchase of her home in 2006. Aegis later assigned the mortgage to Pacifica L. Nineteen, LLC. The right to service the mortgage was transferred to CitiMortgage. In May 2010, the servicing rights were transferred to Acqura. Before the transfer to Acqura, Acqura had entered into a SPA with Fannie Mae. ²

Gretsch lost her job in 2008, and she received a loan extension agreement from CitiMortgage in March 2009. In April 2010, CitiMortgage notified Gretsch that she had been granted forbearance and payment restructuring under a Citi Homeowner Unemployment Assistance Forbearance agreement and that her monthly payments would be $300. After she had made 3 months of payments, Acqura, the serviceras of May 2010, notified Gretsch that it would no longer accept her payments.

Gretsch alleges that she was eligible for a HAMP loan modification. Gretsch also alleges that she continued to make requests for mortgage assistance to Acqura, including a request for a HAMP loan modification, all of which were ignored or denied without notice or explanation to Gretsch. Thereafter, Gretsch alleges, Acqura allowed mortgage foreclosure proceedings to be commenced against Gretsch without performing any of the requirements under HAMP. Finally, Gretsch alleges that Acqura has not otherwise complied with the HAMP requirements.

Gretsch filed suit on July 14, 2011. Gretsch filed an amended class action complaint in January 2012, alleging violations of state consumer protection statutes including Minn.Stat. § 58.13, subd. 1(a)(5) (2012) (Count I), Negligence (Count II), and Breach of Contract (Count III).³ Acqura filed a motion to dismiss pursuant to Minn. R. Civ. P. 12.02(e).

The district court granted Acqura's motion, in part because HAMP does not create a private right of action and because SPAs do not give rise to third party beneficiary claims. The court concluded that because there was no breach of a contract between Acqura and Gretsch, and Gretsch was not a party to the SPA allegedly breached, that Gretsch lacked standing to enforce the directives of HAMP. Gretsch appealed.

The court of appeals affirmed. Gretsch v. Vantium Capital, Inc., No. A12–2270, 2013 WL 2928200 (Minn.App. June 17, 2013). The court concluded that Minn.Stat. § 58.18, subd. 1, is ambiguous because it does not “specifically state that only a party to a written agreement has the right to bring a private action,” making it possible to interpret the statute to confer standing on an injured borrower or to confer standing only on a borrower whose contract was breached. Gretsch, No. A12–2270, 2013 WL 2928200, at *3. The court construed the statute as allowing a private right of action only for those borrowers who are themselves parties to the agreements that were allegedly breached. Because HAMP provides no private right of action and because Gretsch was not a party or an intended beneficiary of the SPA, the court concluded that Minn.Stat. § 58.18, subd. 1, provides no private cause of action to Gretsch and that she therefore lacks standing. Gretsch, No. A12–2270, 2013 WL 2928200, at *4. We granted Gretsch's petition for review.

On appeal to our court, Gretsch argues that she has standing under Minn.Stat. § 58.18, subd. 1, to pursue her claim that Acqura did not meet its obligations under the SPA. Acqura disagrees and contends that Gretsch does not have standing to pursue her claim that Acqura violated the SPA. Acqura also argues that if Minn.Stat. § 58.18, subd. 1, gives Gretsch standing, federal law preempts the state law. Finally, Acqura argues that if we construe Minn.Stat. § 58.18 to provide Gretsch with a cause of action, the statute is unconstitutional. Whether a statute provides a private right of action and confers standing is a legal question we review de novo. See In re Custody of D.T.R., 796 N.W.2d 509, 512 (Minn.2011); Zurich Am. Ins. Co. v. Bjelland, 710 N.W.2d 64, 68 (Minn.2006). Whether federal law preempts state law and whether Minn.Stat. § 58.18 violates the constitution are also questions that we review de novo. State v. Castillo–Alvarez, 836 N.W.2d 527, 534 (Minn.2013) (reviewing constitutional question de novo); Martin ex rel. Hoff v. City of Rochester, 642 N.W.2d 1, 9 (Minn.2002) (reviewing federal preemption question de novo). Finally, in reviewing the district court's dismissal of the complaint, we consider “only the facts alleged in the complaint, accepting those facts as true and must construe all reasonable inferences in favor of the nonmoving party.” Park Nicollet Clinic v. Hamann, 808 N.W.2d 828, 831 (Minn.2011) (citation omitted) (internal quotation marks omitted).⁴

I.

We turn first to the question of whether Gretsch has standing to sue Acqura for breach of the SPA between Acqura and Fannie Mae. A plaintiff may have standing in two ways: “either the plaintiff has suffered some ‘injury-in-fact’ or the plaintiff is the beneficiary of some legislative enactment granting standing.” Enright v. Lehmann, 735 N.W.2d 326, 329 (Minn.2007) (citing Snyder's Drug Stores, Inc. v. Minn. State Bd. of Pharmacy, 301 Minn. 28, 31–32, 221 N.W.2d 162, 165 (1974)). The parties agree that Gretsch has standing only if the Legislature provided her with a private right of action in Minn.Stat. § 58.18, subd. 1.⁵

Gretsch contends that she has standing under Minn.Stat. § 58.18, subd. 1, to pursue her claim against Acqura for Acqura's alleged breach of the SPA. Acqura disagrees and argues that the statute does not provide Gretsch with a cause of action for breach of the SPA. We agree with Gretsch.

A.

Minnesota Statutes § 58.18, subd. 1, provides: “A borrower injured by a violation of the standards, duties, prohibitions, or requirements of section [ ] 58.13 ... shall have a private right of action....” In other words, section 58.18 gives borrowers a private right of action to sue for violations of section 58.13. So, if Gretsch alleges a violation of section 58.13, the plain language of section 58.18 gives her standing to pursue that claim.

Gretsch alleges that Acqura violated section 58.13. Specifically, it is a violation of Minn.Stat. § 58.13, subd....