                          SUPREME COURT OF MISSOURI
                                   en banc


SHELBY E. WATSON,                                                                      )
                                                                                       )
              Appellant,                                                               )
                                                                                       )
v.                                                                                     )        No. SC93769
                                                                                       )
WELLS FARGO HOME                                                                       )
MORTGAGE, INC., ET AL.,                                                                )
                                                                                       )
              Respondents.                                                             )


                APPEAL FROM THE CIRCUIT COURT OF THE CITY OF ST. LOUIS
                          The Honorable Bryan L. Hettenbach, Judge

                                                               Opinion issued August 19, 2014

              Shelby Watson appealed from the trial court’s judgment in favor of Wells Fargo

on her Missouri Merchandising Practices Act (MMPA), section 407.020 1 claim, in which

she maintained Wells Fargo engaged in bad faith negotiations of a loan modification and

wrongfully foreclosed on a deed of trust. The trial court held that since Wells Fargo’s

actions were not done before or at the time of the extension of credit in the original loan,

and Wells Fargo was not an original party to that transaction, its actions were not “in

connection with” the sale of the original loan.

                                                            
1
    All references are to RSMo Supp. 2013 unless otherwise noted.
       This case, like Conway v. CitiMortgage Inc., --- S.W.3d --- (Mo. banc 2014) (No.

SC93951), decided today, raises the issue of when the actions of a loan servicer who was

not a party to the initial transaction are “in connection with” the initial sale of the loan.

In Conway, it was determined that a plaintiff may state a claim under the MMPA against

a loan servicer who was not a party to the initial transaction for the alleged wrongful

foreclosure on a deed of trust.

       Here, Watson alleged that Wells Fargo violated the MMPA in two ways: (1)

wrongfully foreclosing on the deed of trust; and (2) engaging in bad faith negotiations of

a loan modification, even though there was no obligation to renegotiate under the terms

of the original loan. To the extent Watson’s allegations relate to the wrongful

foreclosure, summary judgment is not appropriate pursuant to Conway. However,

because Wells Fargo was not enforcing the terms of the original loan when it negotiated

the loan modification, its actions did not violate the MMPA as they were not “in

connection with” the sale of the original loan. The trial court’s judgment is affirmed in

part and reversed in part, and the case is remanded.

                                    Factual Background

       To finance the purchase of a new home in 2006, Shelby Watson obtained a loan

from Mortgage Resources in the Midwest that was secured by a deed of trust on the

property. The deed of trust stated that Mortgage Resources was not under any obligation

to renegotiate the terms of the loan. Wells Fargo began servicing the loan soon

thereafter.

       When Watson became unable to make the monthly payments, she requested a loan
modification from Wells Fargo. According to Watson, her request was approved, but she

did not learn of the approval until after the deadline to accept the new terms. Wells Fargo

then invited her to apply for a second modification. Watson contends that she accepted

the second modification and that Wells Fargo ratified the modification. According to

Wells Fargo, the two parties engaged in discussions related to the loan modification but

never reached an agreement. Wells Fargo foreclosed on the property and sold it to

Fannie Mae.

       Watson then filed a single-count petition alleging that Wells Fargo violated the

MMPA. Wells Fargo filed a motion for summary judgment, arguing that Watson could

not produce evidence that Wells Fargo’s actions were done “in connection with” the sale

of the loan. Wells Fargo argued that its actions did not relate to any claims or

representations made before or at the time Watson first obtained the loan and that it was

not a party to the transaction when Watson first obtained the loan. The trial court entered

judgment for Wells Fargo, and Watson appeals. This Court granted transfer pursuant to

Mo. Const. art. V, sec. 10.

                                    Standard of Review

       An appellate court’s review of a motion for summary judgment is essentially de

novo. ITT Commercial Fin. Corp. v. Mid-Am. Marine Supply Corp., 854 S.W.2d 371,

376 (Mo. banc 1993); Rule 74.04. Summary judgment is appropriate when a moving

party shows there are no genuine issues of material facts and the party is entitled to

judgment as a matter of law. ITT Commercial Fin., 854 S.W.2d at 376. Since the review

is de novo, a trial court’s order may be affirmed on a different basis than that used at trial.

                                               3
 
Id. at 387-88.

                                                               Analysis

              Watson alleges that Wells Fargo violated the MMPA by: (1) negotiating the loan

modification in bad faith; (2) using an unequal bargaining power to obtain Watson’s

signature on the modification agreement; (3) falsely stating she had rescinded the

modification agreement after accepting it to justify proceeding with the foreclosure sale;

(4) foreclosing on the property despite promising to postpone foreclosure proceedings

during the modification discussions; and (5) failing to provide notice of the foreclosure

sale in violation of section 443.325, RSMo 2000. These allegations can be divided into

two categories: those relating to the loan modification negotiations and those relating to

the alleged wrongful foreclosure. Allegations (1) through (3) fall into the loan

modification category, while allegations (4) and (5) relate to the alleged wrongful

foreclosure. At issue in this case is whether these actions were done “in connection with”

the original loan transaction. 2

              The MMPA, as first adopted by the legislature in 1967, protects consumers by

expanding the common law definition of fraud “to preserve fundamental honesty, fair

play and right dealings in public transactions.” State ex rel. Danforth v. Independence

Dodge, Inc., 494 S.W.2d 362, 368 (Mo. App. 1973); see Huch v. Charter Commc’ns,

                                                            
2
  Watson also argues that the loan modification negotiations constitute a separate sale under the
MMPA and that Wells Fargo actions were “in connection with” the loan modification
negotiations. However, Watson did not raise this argument below. Because litigants may not
raise an argument for the first time on appeal, this point will not be considered. See State v.
Carter, 415 S.W.3d 685, 689 (Mo. banc 2013). After remand, Watson may seek leave to file an
amended petition that includes these claims. This Court offers no opinion as to whether these
claims are actionable under the MMPA.
                                                                  4
 
Inc., 290 S.W.3d 721, 725-26 (Mo. banc 2009). For this purpose, section 407.020.1

makes the “act, use or employment by any person” of any unfair or deceptive practice

done “in connection with the sale or advertisement of any merchandise” unlawful

(emphasis added). The use of an unlawful practice is a violation of the MMPA “whether

committed before, during or after the sale,” so long as it was made “in connection with”

the sale. See section 407.020.1. Section 407.025.1, RSMo 2000, permits private

individuals to bring an action under the MMPA,3 and courts may award a prevailing

party punitive damages and attorney fees.

              While the MMPA states that a violation can happen at any time before, during or

after a sale, it does not set out when an unlawful act is committed “in connection with”

the sale. In Conway v. CitiMortgage, decided today, this Court examined “in connection

with” in the loan collection context. In Conway, the plaintiffs alleged that the defendants

wrongfully foreclosed on the deed of trust that the plaintiffs executed when they

purchased their property. --- S.W.3d at --- (Mo. banc 2014) (No. SC93951). Conway

held that when the operative transaction is the procurement of a loan, the “sale” is not

complete when the lender extends the credit, but continues throughout the time the

borrower is making payments on the loan. Id. at --- (slip op. at 7). The enforcement of

the loan’s terms is “in connection with” the sale of the loan because the sale continues for

the life of the loan. Id. at --- (slip op. at 7). In the context of an alleged wrongful

foreclosure, the plaintiff was able to state a claim under the MMPA against the

                                                            
3
 Section 407.100, RSMo 2000, allows the attorney general to pursue a cause of action under the
MMPA as well.
                                                               5
 
foreclosing entity, regardless of whether that entity was a party when the loan was first

procured, because “a party’s rights to collect a loan is part of that sale and, therefore, ‘in

connection with’ the loan.” Id. at --- (slip op. at 7). Following this analysis, summary

judgment is not appropriate with respect to Watson’s wrongful foreclosure allegations.

       The loan modification negotiations, however, were not “in connection with” the

sale of this loan because that was not a service the lender agreed to sell or the borrower

agreed to buy when the parties agreed to the loan. For the purposes of the MMPA, a loan

is a bundle of services. Even though the sale of the loan continues until those services are

completed, the extent of those services – the rights and obligations of the parties with

respect to the loan – is fixed at the outset when the parties agree to the terms of the loan.

The deed of trust executed in the original transaction specifically stated that there was no

obligation to engage in renegotiations. In engaging in loan modification negotiations,

Wells Fargo was not enforcing the terms of the loan but rather contemplating creating a

new agreement. Its actions were not “in connection with” the sale of the original loan.

       Watson further argues that an obligation to act in good faith arises at the time of

the transaction. Watson contends that since a seller’s breach of this duty will often not

occur until long after the terms of a sale are finalized, the loan modification negotiations

were “in connection with” the original transaction. For support, she relies on Ward v.

West County Motor Co., Inc., 403 S.W.3d 82 (Mo. banc 2013). In Ward, the defendant

filed a motion to dismiss the plaintiffs’ MMPA claims, which alleged in relevant part that

the defendant acted in bad faith in telling the plaintiffs that deposits they paid were

refundable when they were, in fact, nonrefundable. Id. at 83-84. Relying on 15 CSR §

                                               6
 
60-8.040, which states a failure to act in good faith is an unfair practice under the

MMPA, this Court determined that an allegation of a lack of good faith was a ground for

relief under the MMPA. Id. at 86.

              Watson’s reliance on Ward is misplaced. While a lack of good faith may give rise

to a MMPA claim, Ward is inapposite in this case because Watson does not argue that

Wells Fargo was enforcing the terms of the initial loan in bad faith. Rather, she argues

that Wells Fargo engaged in loan modification negotiations in bad faith. As noted above,

the loan modification negotiations were not related to the enforcement of the original

loan terms, so a lack of good faith in the negotiations cannot be “in connection with” the

sale of the original loan.

                                                               Conclusion

              For the foregoing reasons, the trial court’s judgment is affirmed in part and

reversed in part, and the case is remanded. 4



                                                                            _________________________
                                                                             Mary R. Russell, Chief Justice


Breckenridge, Fischer, and
Wilson, JJ., concur; Draper, J.,
concurs in part and dissents in
part in separate opinion filed;
Stith and Teitelman, JJ.,
concur in opinion of Draper, J.
                                                            
4
  Prior to the submission of this case on appeal, Watson filed a motion for her attorney fees on
appeal pursuant to section 407.025.1, RSMo 2000. On remand, the trial court should determine
the appropriate amount of attorney fees for counsel’s appellate work. Berry v. Volkswagen Grp.
of Am., Inc., 397 S.W.3d 425, 435 (Mo. banc 2013).
                                                                   7
 
            SUPREME COURT OF MISSOURI
                     en banc
SHELBY E. WATSON,                        )
                                         )
       Appellant,                        )
                                         )
v.                                       )      No. SC93769
                                         )
WELLS FARGO HOME                         )
MORTGAGE, INC., ET AL.,                  )
                                         )
       Respondents.                      )

        OPINION CONCURRING IN PART AND DISSENTING IN PART

       I concur with the principal opinion’s holding that summary judgment was not

appropriate with respect to Watson’s wrongful foreclosure allegations. I respectfully

dissent however, from the principal opinion’s holding concerning Watson’s loan

modification allegations. Under these facts, and given Wells Fargo’s position as the

original loan servicer for the initial mortgage loan, clearly the loan modification was “in

connection with” the original loan. The principal opinion holds that because Wells Fargo

was not enforcing the original loan terms when it negotiated Watson’s loan modification,

its actions were not “in connection with” the sale of the original mortgage loan. I believe

the principal opinion has construed the phrase “in connection with the sale”

incongruously to this Court’s holding in Conway v. CitiMortgage Inc., -- S.W.3d -- (No.
SC93951) (Mo. banc 2014), decided today, and this holding amounts to a distinction

without a difference. Such a narrow reading permits an original loan servicer, Wells

Fargo, to escape liability for its bad faith negotiations that had a relationship to the

refinancing of the original loan and the execution of the foreclosure that cost Watson her

home.

        The purpose of the MMPA is the protection of consumers. Huch v. Charter

Commc’ns., Inc., 290 S.W.3d 721, 724 (Mo. banc 2009).The MMPA was enacted to

“supplement the definitions of common law fraud in an attempt to preserve fundamental

honesty, fair play and right dealings in public transactions.” Chochorowski v. Home

Depot U.S.A., 404 S.W.3d 220, 226 (Mo. banc 2013). “The statute … paint[s] in broad

strokes to prevent evasion thereof due to overly meticulous definitions.” Schuchmann v.

Air Servs. Heating & Air Conditioning, Inc., 199 S.W.3d 228, 233 (Mo. App. S.D. 2006).

        Section 407.020.1, RSMo 2000, provides that “any deception, fraud, false

pretense, false promise, misrepresentation, unfair practice or the concealment,

suppression, or omission of any material fact in connection with the sale… of any

merchandise … is declared to be an unlawful practice.” (Emphasis added). Moreover,

“[a]ny act, use or employment declared unlawful by this subsection violates this

subsection whether committed before, during or after the sale, advertisement or

solicitation.” Id. (Emphasis added).

        In Conway, the principal opinion finds that the phrase “in connection with” the

sale means there must be a relationship between the sale of merchandise and the alleged

unlawful action. Conway, -- S.W.3d -- (slip op. at 6). Specifically, the plaintiffs had to

                                            2
 
allege a relationship between the foreclosure actions and the original loan to prevail

under the MMPA. Id. at --- (slip op. at 6-7).This Court held that, “[f]or the purposes of

the MMPA, a loan is an agreed upon bundle of services being ‘sold’ by the lender to the

borrower, and the ‘sale’ of the loan lasts until the last service is performed or the loan is

repaid.” Id. at --- (slip op. at 2) (Emphasis added). “As long as the plaintiff alleges that

the misconduct occurred in connection with the services that comprise the ‘sale’ of a

loan, the actor can be liable under the MMPA.” Id.

       The principal opinion found Conway did not apply in Watson’s case because the

bad faith negotiations Wells Fargo engaged in were not pursuant to the terms of the loan

because the deed of trust specifically stated there was no obligation to engage in

renegotiations of the financing terms. The principal opinion found Wells Fargo was not

enforcing the original terms of the loan, but rather was contemplating a new agreement.

Therefore, the principal opinion reasons Wells Fargo’s actions were not “in connection

with” the original sale of the mortgage loan.

       While the terms of the original mortgage loan did not contain an obligation to

renegotiate the financing terms, Wells Fargo chose to do so as part of its “bundle of

services,” going so far as to execute a binding loan modification. Even if one were to

accept the premise that the parties were contemplating a new agreement, Wells Fargo still

had an obligation under the MMPA to avoid engaging in deception, fraud, false pretense,

false promise, or misrepresentation with respect to those negotiations. There is no way to

work around the fact that the new agreement would have been “in connection with” the

original loan as was the case in Conway. Conway further explained that the “sale”

                                                3
 
continues throughout the time the borrower is making payments on the loan and lasts

until the last service is performed or the loan is repaid. Here, Watson still was receiving

the “bundle of services” that were “in connection with” the original loan because she had

not successfully refinanced the terms of her loan during the negotiations. Moreover,

Wells Fargo had not performed “the last service,” nor had Watson repaid the loan during

the loan modification negotiations. Therefore, I believe the “sale” continued throughout

the loan modification process, and, as such, Watson demonstrated the loan modification

process was “in connection with the sale” for purposes of demonstrating a violation of the

MMPA.

       Accordingly, I believe the circuit court erred in entering summary judgment in

Wells Fargo’s favor on Watson’s loan modification allegations. I would reverse the

circuit court’s judgment and remand the case for further proceedings on all of the

allegations raised in Watson’s petition.



                                                ______________________________
                                                GEORGE W. DRAPER III, JUDGE




                                            4
 
