Judge Speaks Out On Nationwide Squeeze Of Court Systems In Ruling That Bay State Couple's Promissory Estoppel Claim Scores Temporary Foreclosure Halt

In highlighting the problems facing state court systems "addled by budget shortfalls, which cannot remotely keep up with the pace of foreclosure lawsuits" that plays a role in the "terrible mess that is hindering the nation's economic recovery," Columnist Andrew Cohen with The Atlantic reports on the story of a Scituate, Massachusetts couple, homeownners Frank and Deana Dixon, and their experience with Wells Fargo in seeking a modification of their home mortgage:

• Eighteen months [after being verbally instructed to default on their payments and supplying the bank with all requested financial documents], however, instead of modifying the loan, Wells Fargo told the Dixons that they had defaulted upon their payment obligations -- because they hadn't made their monthly payments.



• The bank told the family it intended to foreclose upon their house. The notice from Wells Fargo, which arrived 17 days before Christmas 2010, gave the family roughly 30 days notice. The Dixons sued to stop the foreclosure and their case wound up in federal court, before Chief U.S. District Judge William Young of Massachusetts.



• Last Friday, Judge Young issued a ruling that gives the Dixons an opportunity to win their case (the family sought merely to bring Wells Fargo back to the negotiating table to discuss the loan modification).

In refusing Wells Fargo's request to dismiss the Dixon's case, Judge Young simply applied the law in finding that "The facts as alleged in the complaint are sufficient to invoke the doctrine of promissory estoppel, and this common-law claim, as applied, is not preempted by federal law."(1)

In concluding his article, describing how courts nationwide have been so financially squeezed to the point where they can't keep up with foreclosure cases that keep flooding the system, The Atlantic columnist Andrew Cohen makes this observation:

• Judge Young cited me in Dixon v. Wells Fargo (Footnote 11) for the proposition that the legislative and executive branches are abandoning the judicial branch just when people need their judges and courthouses most.



• The Dixons got lucky. They were randomly assigned a judge who was willing to quickly move on their case and to speak out about the larger problem.
  
  But for every family like the Dixons there are thousands more whose lives are in limbo while they wait for their foreclosure cases to wend their way through court. It's yet another sign that America is slouching toward third-world justice for its citizens. Surely we can do better for these other families, if not for their own sake then for the sake of the nation's real estate market.

For more, see Justice Foreclosed (Financially battered state courts simply cannot keep up with rising mortgage defaults).

For Chief Judge Young's 52-page ruling, see Dixon v. Wells Fargo, Civil Action No. 11-10368-WGY (D. Mass. July 22, 2011).

(1) In elaborating further on the promissory estoppel claim, Chief Judge Young wrote (bold text is my emphasis):

• In the present case, Wells Fargo convinced the Dixons that to be eligible for a loan modification they had to default on their payments, and it was only because they relied on this representation and stopped making their payments that Wells Fargo was able to initiate foreclosure proceedings.
  
  While there is no allegation that its promise was dishonest, Wells Fargo distinctly gained the upper hand by inducing the Dixons to open themselves up to a foreclosure action. In specifically telling the Dixons that stopping their payments and submitting financial information were the "steps necessary to enter into a mortgage modification," Wells Fargo not only should have known that the Dixons would take these steps believing their fulfillment would lead to a loan modification, but also must have intended that the Dixons do so.