Homeowners’ Post-Foreclosure Claims Dismissed

A Richmond U.S. District Court says homeowners who lost their home to foreclosure have not stated claims for equitable estoppel, constructive fraud or negligence, with allegations that they relied on defendant Bank of America’s representations that the foreclosure sale was cancelled after receipt of plaintiffs’ loan modification package and failed to pursue any other loan modification attempts.

Virginia has expressly declined to adopt promissory estoppel as a cause of action, and plaintiffs’ claim of promissory estoppel fails as a matter of law. Accepting as true plaintiffs’ allegation that defendant represented to them that the foreclosure sale of plaintiffs’ home was cancelled. Plaintiffs cannot show that they reasonably relied on that representation.

In Foremost Guar. Corp. v. Meritor Savings Bank, 910 F.2d 118 (4^th Cir. 1990), the 4^th Circuit applied Virginia law in holding that one may not reasonably rely upon an oral statement when he has in his possession a contrary statement in writing. Here, the deed of trust and note executed by plaintiffs in this matter clearly provide that in the event of plaintiffs’ default, lender has the right to demand immediate payment of the unpaid principal amount and invoke the power of sale. Therefore, plaintiffs cannot show reasonable reliance on an oral representation to circumvent their obligations under the parties’ agreements and a likely result if plaintiffs did not satisfy those obligations.

Moreover, plaintiffs’’ complaint fails to sufficiently allege the detriment or injury necessary for an equitable estoppel claim. Plaintiffs allege they relied on a representation by defendant that the foreclosure sale of their home was cancelled and as a result ceased other efforts to prevent the foreclosure sale. Plaintiffs, however, fail to identify any other action they could have reasonably taken to prevent the foreclosure sale from occurring to show that the outcome and alleged detriment – plaintiffs’ home being sold in a foreclosure sale – would have been any different. To the extent plaintiffs attempt to state a claim of equitable estoppel, they have failed to do so. For the same reasons, plaintiffs have failed to state a claim of constructive fraud.

The court also dismisses plaintiffs’’ claims for constructive fraud and for negligence.

Suit dismissed.

Cormier v. Atlantic Law Group (Spencer) No. 3:12cv178, Aug. 7, 2012; USDC at Richmond, Va. VLW 012-3-377, 13 pp.