McFarland v. Wells Fargo Bank, N.A.

Phillip McFarland (plaintiff) refinanced his home during a strong housing market, but after the market collapsed his loan exceeded his home's value, he fell behind on payments, and Wells Fargo Bank, N.A. (defendant) began foreclosure. McFarland sued, claiming the refinancing contract was void both because its terms were substantively unconscionable and because it was unconscionably induced by an inflated home appraisal. The district court held that a loan exceeding the home's value was not, by itself, substantively unconscionable, and further held that both his unconscionability and unconscionable-inducement claims required a showing of substantive unconscionability; it dismissed both claims, and McFarland appealed.