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Brasch v. Wells Fargo Bank, N.A.

United States District Court, E.D. Pennsylvania

July 31, 2018

JOHN F. BRASCH et al., Plaintiffs,
v.
WELLS FARGO BANK, N.A. et al., Defendants.

          MEMORANDUM

          GENE E.K. PRATTER UNITED STATES DISTRICT JUDGE.

         When a lending institution loans on the basis of an allegedly fraudulent home appraisal, can the borrowers establish justifiable reliance even when they did not know the value of the appraisal? Plaintiffs John and Marie Brasch believe so, suing Wells Fargo for “inducing” them, on the basis of an inflated home appraisal, to take out loans they cannot repay. However, the Brasches never saw the allegedly fraudulent appraisal, and actually knew the real value of their home was substantially lower than the loans they took out.

         To prove their fraud claims, the Brasches must show justifiable reliance on the allegedly fraudulent or deceptive conduct. Because the Court finds that justifiable reliance cannot be demonstrated absent knowledge of the fraudulent appraisal, the Brasches' claims fail as a matter of law. Accordingly, summary judgment is granted in favor of Wells Fargo.

         Background

         Wells Fargo issued and approved a home equity secured line of credit with a value of up to $250, 000 for the Brasches in 2005 and a 30-year mortgage of $252, 697.50 in 2006. During this process, Wells Fargo appraised the Brasches' home as having a value of $380, 000, which the Brasches claim overvalued their $227, 000 home by $153, 000. The Brasches were never told of the valuation. At the time, Mr. Brasch (the spouse who actually took out the loan) believed his home was worth somewhere in the range of $200, 000.

         In the wake of the 2008 housing market collapse, Congress enacted the Home Affordable Refinance Program (HARP) to help borrowers at high risk of defaulting on a mortgage. In 2014, Wells Fargo advertised on the internet for HARP refinancing. Mr. Brasch answered the advertisement and was approved for lower-interest refinance based upon the 2006 appraisal of his home. Mr. Brasch still did not know the value of Wells Fargo's appraisal.

         Three years after the HARP loan, and 11 years after the initial mortgages, the Brasches sued Wells Fargo, claiming that Wells Fargo fraudulently misrepresented the market value of the Brasches' home. The Brasches claim $150, 000 in damages, alleging that Wells Fargo's use of an incorrect appraisal and property report constituted fraudulent misrepresentation of their property's market value. The Brasches contend that Wells Fargo used this value to induce the Brasches to over-borrow and accuse Wells Fargo of engaging in equity stripping. Equity stripping involves lending unnecessarily large amounts of money, which makes it difficult for the homeowners to refinance or sell their home to pay off the loans. Despite this claim, all parties agree that the Brasches have timely made payments on these loans and Wells Fargo distributed the proceeds of the 2005 and 2006 loans.

         Legal Standard

         A court shall grant a motion for summary judgment “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). An issue is “genuine” if there is a sufficient evidentiary basis on which a reasonable jury could return a verdict for the non-moving party. Kaucher v. Cty. of Bucks, 455 F.3d 418, 423 (3d Cir. 2006) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). A factual dispute is “material” if it might affect the outcome of the case under governing law. Id. (citing Anderson, 477 U.S. at 248). Under Rule 56, the Court must view the evidence presented on the motion in the light most favorable to the non-moving party. See Anderson, 477 U.S. at 255. However, “[u]nsupported assertions, conclusory allegations, or mere suspicions are insufficient to overcome a motion for summary judgment.” Betts v. New Castle Youth Dev. Ctr., 621 F.3d 249, 252 (3d Cir. 2010).

         The movant bears the initial responsibility for informing the Court of the basis for the motion for summary judgment and identifying those portions of the record that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Where the non-moving party bears the burden of proof on a particular issue, the moving party's initial burden can be met simply by “pointing out to the district court that there is an absence of evidence to support the nonmoving party's case.” Id. at 325. After the moving party has met the initial burden, the non-moving party must set forth specific facts showing that there is a genuinely disputed factual issue for trial by “citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations . . ., admissions, interrogatory answers, or other materials” or by “showing that the materials cited do not establish the absence or presence of a genuine dispute.” Fed.R.Civ.P. 56(c).

         Summary judgment is appropriate if the non-moving party fails to rebut by making a factual showing “sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Celotex, 477 U.S. at 322.

         Discussion

         The Brasches' claims arise under the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL), which generally prohibits fraudulent conduct. Wells Fargo's motion for summary judgment offers two relevant arguments in favor of granting summary judgment on the Brasches' UTPCPL claims. First, the lender claims that the statute of limitations for the alleged fraud of 2005 and 2006 has run because the Brasches filed suit in July 2017. Second, the lender argues that the Brasches are unable to prove justifiable reliance as required for a UTPCPL claim.[1] Because the Court agrees with both arguments, Wells Fargo's motion for summary judgment is granted with respect to the UTPCPL claims.

         Although the initial complaint was devoid of any mention of federal law, the Braches alleged in their response to Wells Fargo's motion that Wells Fargo violated the Home Ownership and Equity Protection Act (HOEPA). See 15 U.S.C. § 1639. HOEPA was enacted to protect against predatory lenders by requiring disclosure of certain consumer credit terms and prohibiting various misleading practices. See 15 U.S.C. ยงยง 1601(a), 1639. Wells Fargo argues that HOEPA does not apply to the loans at issue, and that the ...


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