COA – No contract was ever formed in loan modification agreement left partially unsigned by home owner and unsigned by loan servicer

Where a loan modification agreement was returned partially unsigned by the home owner, totally unsigned by loan servicer, and conditions precedent were not met, no contract was ever formed, held the Michigan Court of Appeals in Rodgers v. Ocwen Loan Servicing LLC, No. 327403.

In their 2011 bankruptcy filing, plaintiffs sought to reaffirm the debt of their real property rather than surrendering the property and discharging the debt. Defendant received the servicing rights to the loan in 2012. The parties began steps to modify the loan, starting with an unsigned letter from defendant instructing plaintiffs on the process for modification. Later that year, defendant sent plaintiffs another unsigned letter detailing what the plaintiffs needed to do in order to accept the offer of modification. Subsequently, defendant sent plaintiffs an eight-page “Home Affordable Modification Agreement.” The agreement contained preconditions which included the requirement that plaintiffs sign the document and defendant countersign. The plaintiffs mailed the agreement to defendant but failed to sign on the last page and defendant never returned a signed copy. In early 2013, defendant closed the modification plan and informed plaintiffs that it was denied because they failed to return the fully executed document within the required timeframe. Plaintiffs then sought a declaratory judgment stating that the loan modification agreement was a binding contract and defendant breached it. After plaintiffs filed an amended complaint, Defendant moved for summary disposition which the trial court granted. Plaintiffs appealed.

On appeal, plaintiffs argued that the loan modification agreement should be enforced as a binding agreement. The Court of Appeals disagreed and held that the Michigan Statute of Frauds MCL 566.132(2), “bars any claim, regardless of its label, by plaintiffs to enforce any purported agreement,” because none of the writings presented by plaintiffs were signed with an authorized signature as required under the statute. In addition, the Court held that plaintiffs’ claims for substantial performance and breach of implied covenant of good faith and fair dealing failed because neither party fully executed the agreement and the conditions precedent were not satisfied, thus, no contract was ever formed. Accordingly, the Court affirmed the trial court’s grant of defendant’s motion for summary disposition.