A common misconception in situations where one believes they have been a victim of fraud is that the wrongdoer has to have some level of intent to defraud. In cases where there is promissory fraud, suppression material facts or malice, this is true. However, simple fraud does not require intent. This was taken up by the 11th Circuit Court of Appeals (if unaware of what states the 11th Circuit covers, click here) in Harbin v. Roundpoint Mortgage Company (Docket No. 18-11713, decided December 17, 2018).
In Harbin, Allison Harbin was within days of having her home foreclosed upon when she called Roundtree Mortgage and requested a delay in the foreclosure sale while her application for modification of her loan was pending. The account representative agreed to delay the sale and sent an email confirmation of the delay. However, the sale went on as scheduled. Harbin sued for breach of contract and fraud. The trial court granted summary judgment in favor of Roundtree on the fraud claim, claiming that there was no evidence of intent on the part of Roundtree to deceive Ms. Harbin.
The 11th Circuit reversed, holding that a jury could find that Ms. Harbin reasonably relied on the representation by Roundtree to postpone the foreclosure sale and acted by not filing for bankruptcy protection. Whether there was intent or not wasn't relevant and the court declined to entertain whether the facts supported promissory fraud or fraudulent suppression because the elements of simple fraud could be proven.
There are several takeaways from this case. First, it is important to understand that you can never rely on words alone. Without documentation, you are subject to a "he said/ she said" battle of testimony - and sadly people routinely lie under oath. Always insist on documentation - an email is sufficient. A letter is better. However, anything in writing that can be authenticated which can be attributed to the person making the promise can be used.
Second, it is a good idea when drafting your complaint to add simple fraud even if you think you can prove intent. Negligence and mistake can also be fraud, so long as it is plead in your complaint.
Finally, know your rights. Although the threat of bankruptcy isn't an ideal argument in any negotiation, the fear of it combined with the pending loan modification became powerful leverage in the Harbin case when used to postpone a foreclosure sale. Further, the promise to not file for bankruptcy protection can be seen as "consideration" in a new contract that can bind the mortgage company. In a future lawsuit, this may give you a cause of action for breach of contract. In the Harbin case, consideration wasn't argued on appeal, but courts have routinely declined to make a determination on the sufficiency of the consideration of the parties (ie, what you are giving in return for the promise of the other party - in this situation, the promise to not file bankruptcy in exchange for the promise to postpone the foreclosure sale).
If you have any questions regarding the above or would like a free consultation regarding any legal need, please feel free to call Ritchey Legal at (205) 225-9225 oremail at [email protected].
