Pro Per Plaintiffs Given Another Chance in Mortgage Modification Fraud Against BofA

The California Court of Appeals recently overturned a sustained demurrer against pro-per plaintiffs involved in an alleged mortgage modification fraud.  In Fleet v. Bank of Am. N.A. (229 Cal.App.4th 1403), the Court found the allegations sufficient, based on the liberal standard, and granted the Fleets another chance while recommending that they employ counsel in proceeding further. In 2009, the Fleets applied to modify their mortgage with BofA.  Two years later, BofA informed them of their approval for a modification trial period.  If they made the required payments, their financial hardship would be verified, and their mortgage would be permanently modified.  The Fleets made the first two payments in December 2011 and January 2012, and were told by BofA employees that foreclosure proceedings were suspended.  At the end of January their house was sold at a trustee’s sale.  It appeared that the buyer would rescind the sale after the Fleets disclosed serious structural problems, but they were still evicted in August after spending $15,000 to make necessary repairs.  At all times they attempted to communicate with BofA employees through phone calls and emails, only to be told that either the modification was proceeding smoothly or that BofA was unaware of any loan modification application.  The Fleets sued BofA, its employees, the sale trustee, the buyer and the buyer’s representative for breach of contract, breach of the covenant of good faith and fair dealing, promissory fraud, fraudulent misrepresentation, and promissory estoppel.  After the court sustained the demurrer, the Fleets appealed.

The Court of Appeals noted the similarity with a number of other cases.  Although the Fleets’ complaint improperly labeled their causes of action against BofA, the actual labels are not dispositive if sufficient facts are alleged.

The Court of Appeals found the allegations sufficient for the claims against BofA and its employees.  The Fleets’ could proceed on the claim that BofA breached the trial period agreement and the covenant of good faith and fair dealing by foreclosing on the house.  The Fleets’ included a letter from BofA in their complaint memorializing their acceptance into the modification trial period and although the trial court correctly ruled that the trial period agreement was not a binding loan modification, the terms of the trial period agreement still had to be honored. The Court also found the pleadings sufficient for fraudulent misrepresentation against BofA employees - these defendants were the specific employees who told the Fleets foreclosure was suspended.  Finally, the Court reversed the demurrer as to promissory fraud and promissory estoppel.  Regardless of whether the Fleets could prove BofA never intended to modify the loan but rather intended to foreclose, the allegations were sufficient to allow the claim to proceed to trial.  The Fleets' promissory estoppel claim was included in the event they could not establish a cause of action for breach of contract.  They also alleged an accounting, but the facts did not demonstrate complicated accounts between the parties.

The Court reversed the demurrer for BofA and its employees and sustained the order as to the other defendants.