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Breach of Contract and Intentional Misrepresentation Complaint Dismissed In Home Loan Modification Case

Horacio Campbell v. IndyMac Bank, FSB, et al., No. CCB-09-3182 (D. Md., Jan. 29, 2010)

Plaintiff Horacio Campbell ("Mr. Campbell") sued IndyMac Bank, FSB ("IndyMac Bank"), IndyMac Mortgage Services, and OneWest Bank, FSB ("OneWest Bank"), (collectively "Defendants"), alleging breach of contract and intentional misrepresentation. Mr. Campbell refinanced his home on June 24, 2005 in a loan amount of approximately $344,000. The interest rate on the loan was fixed for ten years at 6.125 percent and was to be adjustable thereafter. At some point, the loan was transferred to IndyMac Bank, to be serviced by OneWest Bank.

Mr. Campbell eventually encountered financial difficulties and was approximately $25,000 in arrears as of March 15, 2008. Around this time, Mr. Campbell attempted to renegotiate his loan with IndyMac Bank and, according to Mr. Campbell, IndyMac Bank offered to modify his loan to a forty-year fixed interest rate loan and to cease all foreclosure activities. IndyMac Bank promised to send Mr. Campbell the modification papers within ninety days and Mr. Campbell accepted the offer and began making the modified monthly payments on his mortgage on April 1, 2008. After ninety days, Mr. Campbell still had not received the modification papers so he contacted IndyMac Bank. He was told that he had been approved, but that he should continue to wait for the papers because of a backlog. Mr. Campbell continued to make the new monthly mortgage payments and IndyMac Bank returned Mr. Campbell's November 2008 payment; therefore, Mr. Campbell contacted IndyMac Bank. IndyMac Bank advised Mr. Campbell to ignore the return payment and to continue making payments. Mr. Campbell continued his monthly payments until January 2009 when he was told that he did not qualify for a loan modification. Unfortunately, his house is currently in foreclosure and the Defendants are pursuing collection activities. For these reasons, Mr. Campbell commenced a civil action against the Defendants on September 15, 2009.

A. Breach of Contract

Mr. Campbell claims that the Defendants breached their contract to modify his home loan; however, he has not alleged that the agreement was ever committed to writing and signed by the Defendants. Accordingly, the alleged contract is not enforceable under Maryland's Statute of Frauds for two distinct reasons: (1) it cannot be performed fully within one year; and (2) it involves an interest in real estate. MD. CODE ANN., CTS. & JUD. PROC. 5-901(3); MD. CODE, REAL PROP. 5-104.

Under MD. CODE, CTS. & JUD. PROC. 5-901(3), an action may not be brought "[o]n any agreement that is not to be performed within 1 year from the making of the agreement," unless either the contract, agreement or "some memorandum or note of it, is in writing and signed by the party to be charged or another person lawfully authorized by that party." When parties "expressly and specifically agree that their oral contracts are not to be performed within one year," the Statute of Frauds will bar any claims.

Here, the parties allegedly agree that Mr. Campbell would make monthly payments for a period of forty years, which is an agreement that cannot be performed within one year. Therefore, the oral contract is not enforceable under Maryland's Statute of Frauds.

Mr. Campbell is also bared from enforcing his oral contract because mortgage contracts fall within the Statute of Frauds. As the oral contract modified Mr. Campbell's home loan and thus concerned an interest in real property, it cannot be enforced.

B. Intentional Misrepresentation

Mr. Campbell also claimed that the Defendants committed intentional misrepresentation by falsely telling him that his loan would be modified in order to induce him to make monthly payments pursuant to the modification plan.

To state a prima facie claim of intentional misrepresentation, or fraud, in Maryland, the plaintiff must demonstrate:

(1) that a representation made by a party was false; (2) that either its falsity was known to that party or the misrepresentation was made with such reckless indifference to truth to impute knowledge to him; (3) that the misrepresentation was made for the purpose of defrauding some other person; (4) that that person not only relied upon the misrepresentation but had the right to rely upon it with full belief of its truth, and that he would not have done the thing from which damage resulted if it had not been made; and (5) that that person suffered damage directly resulting from the misrepresentation.

Mr. Campbell's Complaint did not plead facts sufficient to make a prima facie case of intentional fraud and consisted only of conclusory allegations. This was not enough to survive a Motion to Dismiss. Mr. Campbell's fraud claim mainly consists of recitations of the elements required to prove intentional misrepresentation, unsupported by facts. Moreover, because intentional misrepresentation is a claim based on fraud, it is subject to the heightened pleading requirements of FED. R. CIV. P 9(b). RULE 9(b) requires a Plaintiff to plead "with particularity the circumstances constituting fraud." Given the dearth of facts in the Complaint, Mr. Campbell's claim of misrepresentation fails under the Rule 9(b) pleading requirements as well.

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