Opinion ID: 2197720
Heading Depth: 3
Heading Rank: 2

Heading: Breach of Duty of Good Faith and Fair Dealing Claims Against GE Capital and Wells Fargo

Text: The second count of the complaint alleges that GE Capital and Wells Fargo breached the duty of good faith and fair dealing by: the premature institution of foreclosure proceedings[;] the improper statutory cure amount[;] and the refusal to correct the statutory cure amount and ... postpone on reasonable terms the foreclosure sale[.] The trial court dismissed this count because appellants' complaint was filed more than three years after the date of the notice of foreclosure. Relying on cases cited by appellees, the trial court treated plaintiffs' claim of a breach of the duty of good faith and fair dealing as a breach of contract claim to which a three-year statute of limitations applied. It determined that the contract was breached when the notice of foreclosure was issued on May 22, 2002, a date more then three years before the complaint was filed. The owners argue however, that the notice of foreclosure did not trigger the statute of limitations because they were not injured at that time. They contend that the filing of the notice of foreclosure was an error that could be easily corrected and that they were injured following June 4, 2002, presumably when they learned that the mortgagee would not change the cure amount. We have held that all contracts contain an implied duty of good faith and fair dealing[.] Allworth v. Howard Univ., 890 A.2d 194, 201 (D.C.2006) (internal citation omitted). This duty means that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract. Id. (internal citation omitted). In addition, a party to a contract may be liable for a breach of the duty of good faith and fair dealing if the party evades the spirit of the contract, willfully renders imperfect performance, or interferes with performance by the other party[.] Paul v. Howard Univ., 754 A.2d 297, 310 (D.C.2000). A three-year statute of limitations applies to actions on a contract that is express or implied[.] D.C.Code § 12-301(7) (2001). The statute of limitations begins to run at the time the contract is breached. Eastbanc, supra, 940 A.2d at 1004. Thus, the claim at issue here accrued, and the statute of limitations began to run, when the implied duty of good faith and fair dealing was breached. Appellants contend that we should apply the discovery rule to determine when their cause of action accrued. We have held that [w]here the fact of an injury can be readily determined, a claim accrues at the time that the plaintiff suffers the alleged injury. Hendel v. World Plan Executive Council, 705 A.2d 656, 660 (D.C.1997). We apply the discovery rule to determine when a cause of action accrues, however, in cases where the relationship between the fact of injury and the alleged tortious conduct is obscure when the injury occurs[.] Bussineau v. President and Dirs. of Georgetown Coll., 518 A.2d 423, 425 (D.C.1986). Under the discovery rule, a plaintiff's cause of action accrues when the plaintiff `knows' or `by the exercise of reasonable diligence should know (1) of the injury, (2) its cause in fact, and (3) some evidence of wrongdoing.' Hendel, supra, 705 A.2d at 660-61 (quoting Bussineau, supra, 518 A.2d at 435). However, even under the discovery rule, any `appreciable and actual harm flowing from the [defendant's] conduct' is sufficient for a cause of action to accrue. Id. at 661 (internal citation omitted). Moreover, `[i]t is not necessary that all or even the greater part of the damages ... occur before the [right] of action arises.' Id. (internal citation omitted). Any breach of the duty of good faith and fair dealing arising from the conduct described by the owners and Aisha Murray  premature institution of foreclosure, listing the incorrect cure amount, and refusing to correct the cure amount and postpone the sale  took place at the time the notice of foreclosure was issued. District of Columbia law requires that the holder of a note secured by a mortgage provide a real property owner with written notice of foreclosure at least thirty days in advance of a foreclosure sale. D.C.Code § 42-815(b) (2001). Thus, the institution of foreclosure begins with the issuance of notice to the property owner. In addition, the cure amount that is claimed to be improper is listed on the notice of foreclosure. The sequence of events in this case also confirms that any appreciable harm suffered by the owners and Aisha Murray was caused by the commencement of foreclosure proceedings. After the notice of foreclosure was issued, Aisha purchased the property from the owners. No foreclosure sale took place after the notice of foreclosure was issued, on May 22, 2002. Courts in other jurisdictions have also held that the running of the statute of limitations begins with the filing of the foreclosure notice. In Brown v. King, 166 N.C.App. 267, 601 S.E.2d 296 (2004), an elderly homeowner brought suit against her caregiver alleging that the caregiver breached her fiduciary duty by mortgaging the homeowner's property to secure a business loan. The caregiver argued that the homeowner's claim was barred by the applicable three-year statute of limitations as the transactions identified as fraudulent took place in 1995 and the homeowner did not file her cause of action until 2001. Id. at 297-98. The court disagreed, because the plaintiff offered evidence that she did not learn of [the fraudulent transactions] until she was served with the notice of foreclosure[.] Id. at 298. Thus, for statute of limitations purposes, a cause of action accrued at that time. A California court reached the same conclusion in Engstrom v. Kallins, 49 Cal. App.4th 773, 56 Cal.Rptr.2d 842, 848-49 (1996), where a cosigner of a note and deed of trust alleged that she was not given the notice required by statute for the trust to exercise its power of sale, and in response, the trust argued that the cosigner's claim was barred by the statute of limitations. The trust argued that the claim accrued at the time it failed to give her the required notice while the cosigner contended that the statute of limitations started to run when the trust attempted to enforce its security interest. Id. at 848. The court agreed with the cosigner, explaining that [e]ven before any foreclosure sale, a co-signer, acting to protect his interest, would necessarily incur various expenses in an effort to preserve his interest. Thus, the harm to the co-signer occurs when the creditor acts to enforce its security interest... by instituting foreclosure proceedings. Id. at 849. In this case, the conduct that the owners and Aisha Murray describe as breaching the duty of good faith and fair dealing coincides with the issuance of the notice of foreclosure. They do not dispute that they received the notice of foreclosure and no foreclosure sale ultimately took place. They filed their complaint more than three years after the notice of foreclosure was issued. Therefore, we affirm the trial court's ruling that their claim of the breach of the duty of good faith and fair dealing is barred by the statute of limitations.