Wells Fargo Bank, N.A. v. Nationwide Mortgage Bankers, Inc.

Background

Wells Fargo alleged that it entered into a Loan Purchase Agreement with Nationwide on or about January 7, 2019. According to Wells Fargo, the agreement incorporated the Wells Fargo Funding Seller Guide and required Nationwide to sell only mortgage loans meeting the guide’s requirements. Wells Fargo later sold purchased loans to investors and alleged that it could be required to repurchase loans or indemnify investors when those loans did not meet the investors’ requirements.

Wells Fargo alleged that three loans violated Nationwide’s representations and warranties: a loan secured by property in Valley Stream, New York, involving a transaction misrepresentation; a loan secured by property in Davenport, Florida, involving undisclosed debt; and a loan secured by property in Brooklyn, New York, involving an employment misrepresentation. Wells Fargo alleged that Nationwide refused to repurchase or indemnify it for losses involving those loans and did not pay related fees and penalties.

Wells Fargo also alleged that Nationwide failed to pay costs and fees connected to at least 36 other contractual violations, including escrow deficiencies, underwriting fees, miscellaneous fees, pairoff fees, an early payoff fee, and final document fees. The complaint identified a client billing invoice for $57,785.85. Wells Fargo asserted three causes of action: breach of contract concerning loan representations and warranties, breach of contract concerning contractual loan costs and fees, and a contractual right to attorney’s fees.

Motion-to-dismiss standard

Nationwide moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim. At this stage, the court treated the complaint’s factual allegations as true and considered whether they made Wells Fargo’s claims plausible. The court did not have to accept legal conclusions presented as facts.

Analysis

Loan representations and warranties. The court held that Wells Fargo sufficiently alleged a breach-of-contract claim. It found that Wells Fargo adequately alleged the existence of the Loan Purchase Agreement, the incorporation of the Seller Guide, Nationwide’s alleged failure to meet the guide’s requirements, and monetary losses. The court also held that Wells Fargo did not have to attach the entire Seller Guide to the complaint at the motion-to-dismiss stage.

The court rejected Nationwide’s argument that the merger doctrine barred the claim. The merger doctrine generally concerns the effect of a deed on earlier agreements involving a real-property sale. The court reasoned that the Loan Purchase Agreement concerned the sale and purchase of mortgage loans, not the conveyance of real property. It also concluded that the alleged repurchase or indemnification obligations were later-occurring obligations and that the Seller Guide was incorporated into the agreement rather than being an earlier agreement absorbed into a deed. The court therefore denied the motion as to Count I.

Contractual loan costs and fees. The court held that Wells Fargo sufficiently alleged a separate breach-of-contract claim for costs and fees. The allegations concerned loans different from the three loans described in Count I, and the court found that this supported a reasonable inference that the claimed costs and fees were separate from the repurchase demands. The court rejected Nationwide’s merger-doctrine argument for the same reasons given for Count I and denied the motion as to Count II.

Contractual attorney’s fees. The court explained that Minnesota law generally does not allow attorney’s fees in a breach-of-contract action unless a contract provision allows them. Wells Fargo alleged that section 305.10 of the Seller Guide provided such a right. Because Wells Fargo specifically identified the contractual basis for its request, the court held that the allegation satisfied the pleading requirement for special damages under Federal Rule of Civil Procedure 9(g). The court noted that Wells Fargo would later have to prove the provision but held that the allegation was sufficient at this stage. The court denied the motion as to Count III.

Disposition

The court denied Nationwide’s Motion to Dismiss in full. The order did not decide whether Wells Fargo will ultimately prevail on its claims; it decided only that the complaint alleged enough facts for all three claims to proceed beyond the pleading stage.