Bank of America v. Raschke (WI)

Summary: Borrowers were unreasonable to believe that their application for a loan modification was approved when the lender only represented that they would be eligible for consideration if they completed the requisite trial period payments.


Bank of America, N.A. v. Raschke, 2013 WI App 94, 349 Wis.2d 527, 835 N.W.2d 291 (Wis. Ct. App. 2013).


Facts: Falling behind on their mortgage payments to Bank of America (the Bank) in 2009, Debra and John Raschke (the Raschkes) applied for a loan modification under the federal Home Affordable Modification Program (HAMP). They were subsequently put on a trial period plan (TPP), under which they made a couple of payments, but before any approval could be made, they filed for Chapter 7 bankruptcy.

After being discharged, the Raschkes again applied for a loan modification in 2010. In March 2011, the Bank approved them for its in-house Fannie Mae loan modification program, under which they made one payment. When a Bank employee allegedly told them that they had been approved for HAMP, they stopped making the Fannie Mae payment, preferring HAMP. But no formal approval for HAMP was made, and the Raschkes expected a written confirmation. In May 2011, the Raschkes learned that they did not qualify for HAMP, but did not resume making the Fannie Mae payment. Instead, they renewed their application for HAMP. Later, the Raschkes were informed that they had not been considered for HAMP at all during 2011.

The Bank began a foreclosure action. The Raschkes filed an answer, in which they raised affirmative defenses of (1) equitable estoppel and (2) lack of standing, and claimed (3) that the Bank was not a real party in interest and (4) that it failed to process the loan modification. The Raschkes also filed counterclaims of (5) promissory estoppel and (6) misapplication of payments. The Bank moved the court to dismiss the Raschkes’ counterclaims. After considering Debra’s affidavit and briefs from both parties, the circuit court dismissed the Raschkes’ counterclaims and granted summary judgment on foreclosure sua sponte in favor of the Bank on July 16, 2012. Later, an affidavit by the Bank’s assistant vice president Tyler Dolanch (Dolanch affidavit) was filed. After considering it, the circuit court rendered judgment in favor of the Bank on August 8, 2012. The Raschkes appealed.


Holding: Affirmed. On appeal, the appellate court resolved two complaints by the Raschkes and reviewed the circuit court’s grant of summary judgment de novo.

First, the Raschkes complained that the circuit court did not provide them with sufficient notice that the Bank’s motion to dismiss could convert to a motion for summary judgment. However, the Raschkets filed Debra’s affidavit. Under Wis. Stat. § 802.06(2)(b) (2011–12), the court may treat a motion to dismiss as a motion for summary judgment when material outside the scope of pleadings is presented to the court. Moreover, the record showed that the circuit court plainly advised both parties that Debra’s affidavit could convert the motion to dismiss to a motion for summary judgment.

Second, the Raschkets complained that the circuit court should not have granted summary judgment sua sponte. To the contrary, the circuit court has inherent authority to consider issues sua sponte and to diminish or eliminate objections by giving parties notice and an opportunity to argue the issues. State v. Holmes, 106 Wis. 2d 31, 39–41, 315 N.W.2d 703 (Wis. 1982). The Raschkets had notice and an opportunity to argue (2) and (3) in Debra’s affidavit. Their defenses based on (1) and (4) were properly addressed in the dismissal of their counterclaims.

Third, the Raschkes’ counterclaim of promissory estoppel and affirmative defense of equitable estoppel were properly dismissed ((1) and (5), supra). Promissory estoppel comprises three elements: (a) the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee; (b) the promise induced such action or forbearance; and (c) injustice can be avoided only by enforcing the promise. In addition to these three, equitable estoppel needs one more: a resulting detriment. The Raschkes claimed that the Bank promised, via a thank-you letter and its employee’s verbal representation, that their application for HAMP would be approved. The promise, the Raschkes argued, induced them to make lower payments, which in turn caused them to default, so injustice can be avoided only by requiring the Bank to approve them for a loan modification.

The letter, however, only recited that the Raschkes would be eligible for consideration if they made the requisite TPP payments, short of promising a permanent modification. It was also unreasonable for the Raschkes to rely on the Bank employee’s verbal representation alone because the Raschkes expected that a written confirmation would follow. Moreover, the reason for their default was not because they made lower payments in reliance on the alleged promise; it was their failure of making any payment. Furthermore, a detriment, if any, hardly flowed from the Bank’s action because the Raschkes’ bankruptcy filing interrupted the HAMP application process.

Fourth, the Raschkes’ counterclaim of misapplication of payments ((6), supra), which is based on Debra’s affidavit, was properly dismissed because Debra’s statements in the affidavit were based on information and belief, rather than personal knowledge. Affidavits must be based on personal knowledge to acquire an evidentiary stature for summary judgment purposes. Wis. Stat. § 802.08(3) (2011–12); Leszczynski v. Surges, 30 Wis. 2d 534, 538, 141 N.W.2d 261 (Wis. 1966).

Last, the Dolanch affidavit, even though filed after the grant of summary judgment, was fully considered when the court rendered judgment. The Dolanch affidavit was neither required nor critical for the court to grant the summary judgment.


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By: ATG Underwriting Department | Posted on: Wed, 02/18/2015 - 11:56am