Summary:Daniel Colton fell delinquent on his mortgage with Bank of America in 2009 and began considering filing bankruptcy, but instead sought to refinance or obtain a loan modification. That process stretch for several years, during which time Bank of America entered into the National Mortgage Settlement. Bank of America then in 2012, despite previous indications that it was willing to refinance the mortgage, declined to do so. Mr. Colton again indicated that he intended to declare bankruptcy. Bank of America encouraged Mr. Colton to instead seek a loan modification, which he did and for which he was ultimately denied, losing his home to foreclosure. Mr. Colton subsequently brought suit against Bank of America for fraudulent inducement in discouraging bankruptcy for a false hope of a loan modification. The trail court dismissed this claim and Mr. Colton appealed.
The Court of Appeals affirmed, holding that fraudulent inducement requires an allegation of five essential elements:
(1) A false representation or concealment of a material fact;
(2) Which is reasonably calculated to deceive;
(3) Which is made with the intent to deceive;
(4) Which does in fact deceive; and
(5) Which results in damage to the injured party.
Forbis v. Neal, 361 N.C. 519, 526-27, 649 S.E.2d 382, 387 (2007) (citation omitted).
Here Mr. Colton failed to allege facts indicating that Bank of America cause an actual injury, as Mr. Colton's Complaint only indicated that "bankruptcy would allow him to limit and control his debt before default and to potentially keep his home..." and this was not a cognizable injury.
That neither the trial court or the Court of Appeals understood bankruptcy, particularly reorganizations under Chapter 11 or 13, sufficiently to recognize that such did offer Mr. Colton a real opportunity for retaining his home, is, while a repeated source of disappointment, so unsurprising that Mr. Colton should have more fully described bankruptcy in that complaint.
It is also unfortunate that Bank of America was not referred to the North Carolina Bar Unauthorized Practice of Law Committee for advice deterring Mr. Colton from filing bankruptcy.
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