Opinion ID: 2647804
Heading Depth: 2
Heading Rank: 4

Heading: Promissory Estoppel (Count X)

Text: In Count X, the MacKenzies allege that Borrowers and Flagstar entered into an agreement that a foreclosure sale could be conducted according to the terms of the Power of Sale in the 2009 Mortgage Loan and/or the 2007 Deed of Trust. According to the MacKenzies, [i]mplicit in these contracts is an agreement by Flagstar that all documents recorded by Flagstar relative to the 2007 Deed of Trust or the 2009 Mortgage Loan shall be free from fraud and shall be reliable. The MacKenzies claim that they relied on this promise of Flagstar to their detriment, and have been damaged as a result of the failure of the [sic] Flagstar to keep its promise. Under Massachusetts law, to state a claim for promissory estoppel a plaintiff must allege that (1) a promisor makes a promise which he should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee, (2) the promise does induce such action or forbearance, and (3) injustice can be avoided only by enforcement of the promise. Dill, 935 F. Supp. 2d at 304 (internal quotation marks omitted). The district court dismissed Count X, finding that the MacKenzies had recited the elements of a promissory estoppel claim, but had fail[ed] to articulate the facts to support th[ose] -18- elements. Specifically, Plaintiffs fail[ed] to identify the particular promise that they relied upon and the manner in which such reliance was to their detriment. Looking solely at the Amended Complaint, the district court's decision is plainly correct. These allegations are a textbook illustration of the type of formulaic recitation of the elements of a cause of action that falls below the standard of Federal Rule of Civil Procedure 8(a)(2). Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). On appeal, however, the MacKenzies try to recharacterize their claim. Rather than focusing on implicit contractual promises not to engage in fraud, they now argue that Flagstar engag[ed] in a course of conduct them [sic] for over two years leading them to believe that the result would be a HAMP modification. According to the MacKenzies, they detrimentally relied upon Flagstar's promises by, in part, awaiting determination of HAMP eligibility and loan modification instead of seek[ing] alternatives to foreclosure. [I]t is a virtually ironclad rule that a party may not advance for the first time on appeal either a new argument or an old argument that depends on a new factual predicate. Cochran v. Quest Software, Inc., 328 F.3d 1, 11 (1st Cir. 2003). But even considering these new arguments on their own terms, they fare no better than the allegations below. -19- The MacKenzies claim that Flagstar strung [them] along . . . from October 2009 through the fall of 2011 only to present them with an offer just days before the foreclosure sale, thereby creating a reasonable expectation that Flagstar would modify the loan instead of pursuing foreclosure. These circumstances, the MacKenzies argue, are similar to those in Dixon v. Wells Fargo Bank, N.A., where the district court allowed a promissory estoppel claim to survive a motion to dismiss. 798 F. Supp. 2d 336, 340–52 (D. Mass. 2011). Dixon is distinguishable from the present case, however. In Dixon, Wells Fargo convinced the Dixons that to be eligible for a loan modification they had to default on their [mortgage] payments. Id. at 346. But once the Dixons defaulted, instead of modifying the loan, the bank initiated foreclosure without any warning. Id. at 339. [I]t was only because they relied on this representation and stopped making their payments that Wells Fargo was able to initiate foreclosure proceedings. Id. at 346. Thus, in that case, the plaintiffs alleged both a specific promise and a legal detriment that . . . was a direct consequence of their reliance on [that] promise. Id. at 343. Here, the MacKenzies have done neither. The fact that Flagstar considered the MacKenzies for a loan modification multiple times over a two-year period is not a promise, implicit or otherwise, to consider them for further loan modifications prior to -20- initiating foreclosure. Moreover, the MacKenzies' argument ignores that Flagstar did in fact offer them a loan modification under HAMP on November 2, 2011, which they apparently rejected because they could not afford the initial payment. Thus, even if Flagstar had made an implicit promise to offer them a loan modification, it appears to have fulfilled that promise. Additionally, the MacKenzies have not alleged any facts that would allow us to infer that their decision not to seek alternatives to foreclosure was detrimental to them. In other words, there is no reason for us to believe the MacKenzies would have successfully avoided foreclosure, or been better off in any way, but for their reliance on Flagstar's supposed promise to consider them for a loan modification. Therefore, the MacKenzies have failed to adequately plead the elements of a promissory estoppel claim, and the district court correctly dismissed Count X. E. Validity of the Mortgage Assignment to Flagstar The MacKenzies' final argument asserts that they have standing to challenge Flagstar's authority to foreclose on their home under Culhane v. Aurora Loan Services of Nebraska, 708 F.3d 282 (1st Cir. 2013). They claim that the trust into which the 2007 Mortgage Loan was sold and securitized has since been [d]issolved. Consequently, . . . MERS had nothing to assign to Flagstar on [the] date of the assignment. The MacKenzies conclude that [b]ecause Flagstar received nothing from the assignment it -21- has no authority to commence foreclosure proceeding[s] on the MacKenzies' home. The MacKenzies are correct that Culhane supports their standing to challenge the assignment of the mortgage. The plaintiff in Culhane, however, challenged the assignment under Massachusetts General Laws chapter 183, section 54B. Id. at 293–94. Here, the factual allegations related to purported defects in the assignment are not tethered to any legal claim before us on appeal. In the amended complaint, these allegations appeared in the context of the MacKenzies' claim for fraud (Count I) and perhaps (it is not entirely clear) the claim for violations of Massachusetts General Laws chapter 93A (Count III). The MacKenzies chose not to pursue those claims on appeal. It is not apparent that these allegations are relevant to any of the remaining counts. At oral argument, counsel for the MacKenzies attempted to find a home for these orphaned allegations by suggesting that they are related to the negligence claim. But the MacKenzies premise their negligence claim on Flagstar's alleged failure to follow HAMP guidelines, not on any defects in the assignment. Furthermore, for the reasons discussed above, the negligence claim fails because Flagstar does not owe a duty of care to the MacKenzies. Thus, even accepting as true the MacKenzies' allegations regarding the defective assignment, we would not be able to grant any relief, -22- because the MacKenzies have not preserved on appeal any legal theory on which they might recover.