Mallory v. Wells Fargo Bank, N.A.

688 F.Supp.3d 218

Beatriz I. MALLORY, Plaintiff v. WELLS FARGO BANK, N.A., Defendant.

3:19-CV-744

United States District Court, M.D. Pennsylvania

Filed August 23, 2023

Beatriz I. Mallory, Redondo Beach, CA, Pro Se.

Mark W. Fidanza, Reed Smith LLP, Philadelphia, PA, Aaron M. Bender, Diane A. Bettino, Reed Smith LLP, Princeton, NJ, Beth A. Howell, Reed Smith LLP, Pittsburgh, PA, for Defendant.

MEMORANDUM OPINION

Robert D. Mariani, United States District Judge

I. INTRODUCTION

Presently before the Court is Magistrate Judge Martin Carlson's Report and Recommendation ("R&R") (Doc. 124), which recommends that this Court grant in part and deny in part Defendant Wells Fargo Bank, N.A.'s Motion for Summary Judgment (Doc. 71). Specifically, the R&R recommends the entry of summary judgment in favor of Defendant on all of Plaintiffs claims except breach of contract. (See Doc. 124.) Plaintiff Beatriz Mallory filed objections to the R&R, as did Defendant. (See Docs. 125, 129.) Upon review, one of Plaintiffs objections has merit, and none of Defendant's. The R&R will therefore be adopted as modified.¹

II. ANALYSIS

A. Defendant's Objections

First, the Court addresses Defendant's objections to Judge Carlson's recommendation that its Motion be denied with respect to Plaintiffs breach of contract claim. Defendant objects on three grounds. First, Defendant argues that the Stipulation (Doc. 71-6, Ex. 4, hereinafter "Stip.")² is not an enforceable contract because "there was no meeting of the minds." (Doc. 125 at 2.) Second, Defendant argues that even if it is enforceable, Defendant complied with its obligations by providing Plaintiff with loan modification offers on January 8 and 15, 2016. (Id.; Doc. 125-1 at 11.) Third, Defendant argues Plaintiff failed to establish that she suffered damages caused by Defendant, and therefore Plaintiffs claim should fail. (Doc. 125 at 3.)

1. The Stipulation Is Enforceable

Defendant first objects to the R&R's conclusion that "a valid, enforceable agreement existed between the parties." (Doc. 124 at 13.) Defendant contends this determination "ignores the fact that Plaintiff was never going to accept a loan modification because she believed that the Stipulation entitled her to 'new mortgages,' not modifications of the prior mortgages." (Doc. 125-1 at 8.) In other words, because Defendant understood the Stipulation to provide for loan modifications and Plaintiff understood it to provide for new mortgages, Defendant contends the parties did not "mutually assent to the same thing." (Id. at 10 (quoting United Incentives, Inc. v. Sea Gull Lighting Products, Inc., Case No. 91-0226, 1992 WL 41322 *4, 1992 U.S. Dist. LEXIS 2494, 10 (E.D. Pa. March 2, 1992)).)

At the outset, insofar as Defendant contends that the Stipulation is ambiguous to the point of unenforceable because the parties disagree as to whether the Stipulation provides for new mortgages or loan modifications, that argument is misguided. A contract is not rendered ambiguous merely because the parties dispute its proper construction. Teffeteller v. Teffeteller, 258 A.3d 508 (Pa. Super. Ct. 2021) (quoting Metzger v. Clifford Realty Corp., 327 Pa.Super. 377, 476 A.2d 1, 5 (1984)), rearg. denied, (Aug. 16, 2021). Still, looking solely at the Stipulation itself, the Stipulation repeatedly refers to both "new mortgages" and "loan modifications" in referencing Defendant's obligations. (See Stip. at 4, 5.) "New mortgages" are referenced more frequently, but procedures for "modifying the loans" are also referenced throughout. (Id. at 4.)

Despite the use of both terms, the Stipulation is not unenforceable. Settlement agreements, even where judicially approved, "are construed according to traditional precepts of contract construction." Sang Koo Park v. Evanston Ins. Co., No. CV 19-4384, 2021 WL 5399908, at *3 (E.D. Pa. Nov. 18, 2021), aff'd sub nom. Park v. Evanston Ins. Co., No. 21-3161, 2023 WL 2890165 (3d Cir. Apr. 11, 2023) (quoting In re Columbia Gas Sys. Inc., 50 F.3d 233, 238 (3d Cir. 1995)) (applying Pennsylvania law). Courts will enforce the terms of settlement agreements when they contain the requisites for a valid contract. See id. (first citing Williams v. Metzler, 132 F.3d 937, 946 (3d Cir. 1997); and then citing McDonnell v. Ford Motor, 434 Pa.Super. 439, 643 A.2d 1102, 1105 (1994)). On the other hand, settlement agreements are not enforceable "if the terms are 'ambiguous or poorly defined' such that it is 'impossible to understand' the parties' agreement." Id. (citing Shell's Disposal & Recycling, Inc. v. City of Lancaster, 504 F. App'x 194, 202 (3d Cir. 2012)).

There is, however, a middle ground. A settlement agreement, like any contract, can at the same time contain ambiguities and be enforceable. As the Third Circuit has explained, "any ambiguity that flows from the language . . . used to craft the terms of [an] agreement is more properly seen as a dispute over the interpretation of the contract, not the definiteness (and thus enforceability) of the contract." Am. Eagle Outfitters v. Lyle & Scott Ltd., 584 F.3d 575, 586 (3d Cir. 2009) (applying Pennsylvania law). In such a case, the ambiguity "is the more garden-variety type," and its presence goes to "who (the judge or jury) must decide what the given clause means." Id.

Here, Judge Carlson concluded that "the terms of this Stipulation" were not "so ambiguous as to render the agreement unenforceable," and this Court agrees. (Doc. 124 at 15.) The Stipulation makes clear that Defendant was obligated to deliver some version of a 30-year mortgage with no escrow, no fees, and a 3.75% interest rate, for both the 19D and 19B Hill Top Road properties. (Stip. ¶ 7.) It is an enforceable contract, and Defendant's objection on this ground is without merit.

However, this Court disagrees with the R&R's subsequent conclusion that Defendant's "obligation . . . to provide Mallory with loan modifications" is unambiguous. (Id.) Instead, because Defendant's precise obligation is reasonably susceptible to more than one construction, the Stipulation is ambiguous with respect to whether it required Defendant to deliver loan modifications or new mortgages.³

Under Pennsylvania law, "[w]hen interpreting a contract, a court must determine the intent of the parties and effect must be given to all provisions in the contract." Krizovensky v. Krizovensky, 425 Pa.Super. 204,624 A.2d 638, 642 (1993). "It is firmly settled that the intent of the parties to a written contract is contained in the writing itself."⁴ Id. "While unambiguous contracts are interpreted by the court as a matter of law, ambiguous writings are interpreted by the finder of fact." Kripp v. Kripp, 578 Pa. 82, 849 A.2d 1159, 1163 (2004).

"To be 'unambiguous,' a contract clause must be reasonably capable of only one construction." John Wyeth & Bro. Ltd. v. CIGNA Int'l Corp., 119 F.3d 1070, 1074 (3d Cir. 1997). On the other hand, "[a] contract is ambiguous if it is reasonably susceptible of different constructions and capable of being understood in more than one sense." Hutchison v. Sunbeam Coal Corp., 513 Pa. 192, 519 A.2d 385, 390 (1986). When—and only when—a court determines as a matter of law that an ambiguity exists, "parol evidence is admissible to explain or clarify or resolve the ambiguity, irrespective of whether the ambiguity is patent, created by the language of the instrument, or latent, created by extrinsic or collateral circumstances." Kripp, 849 A.2d at 1163.

Here, it is readily apparent that the Stipulation contains ambiguities because it is internally inconsistent on its face. Both new mortgages and modified loans are referenced throughout, seemingly to refer to the same obligation. Paragraphs seven and eight are prime examples:

7. New mortgages: Wells Fargo will make an absolute commitment to write a new 30 year, 3.75 escrow[-]free, fee-free mortgage for 19D Hill Top Road and 19B Hill Top property. Wells Fargo will do everything in their power to get modification, and this is an avenue that Wells Fargo will absolutely venture. . . .

8. Procedure: Wells Fargo gives assurance that it will approach Fannie Mae and Freddie Mac about modifying the loans and writing new mortgages at the above terms . . . .

(Stip. ¶¶ 7, 8 (emphases added).) The use of the terms interchangeably, together with the fact that the Stipulation does not define any of its terms, creates an ambiguity with respect to which of the two Defendant was obligated to deliver. Inexplicably, the parties' submissions fail to explain the significance of the distinction between a new mortgage and a loan modification. But accepting that Defendant's expected performance under the Stipulation depends upon which of the two was intended, this obligation is ambiguous.⁵

Further, Paragraph 3 of the Stipulation, referring to the payment of legal fees (the "Legal Fees Provision"), is ambiguous as to whether the payment was a continuing obligation or a one-time payment. The Legal Fees Provision reads, "Wells Fargo will pay all of Mallory's legal fees, which as of today's date is $10,301.00." (Stip. ¶ 3.) Viewing the agreement as a whole, there is reason to believe the obligation was intended to be continuing, because the process of effectuating the settlement agreement was ongoing. At the same time, the Stipulation states that "from this date forward" Defendant would "have authority to contact" Plaintiff directly, and correspondence "to facilitate the terms of this agreement" would not run through Plaintiffs counsel. (Stip. at 2.) This suggests that Plaintiff would not continue to incur attorney's fees related to this matter, at least not in connection with her then-current counsel.

The text of the Legal Fees Provision itself is easily read both ways.⁶ It is reasonably susceptible to an understanding that the phrase "all of Mallory's legal fees" was qualified by the total that followed, and therefore required payment of all legal fees incurred to date. But it is also reasonably susceptible to an...