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Stancil v. First Mt. Vernon Indus. Loan Ass'n

Court of Appeals of Columbia District

March 13, 2014

RUFUS AND DELORES STANCIL, APPELLANTS,
v.
FIRST MOUNT VERNON INDUSTRIAL LOAN ASSOCIATION, APPELLEE

         Submitted June 6, 2013

Page 868

          Appeal from the Superior Court of the District of Columbia. (CAR-6061-11). (Hon. John M. Mott, Trial Judge).

         Harry T. Spikes, Sr. was on the brief for appellants.

         Thomas J. Kokolis was on the brief for appellee.

         Before BLACKBURNE-RIGSBY and MCLEESE, Associate Judges, and NEBEKER, Senior Judge.

          OPINION

Page 869

          McLeese, Associate Judge

          Appellants Rufus and Delores Stancil brought this action against appellee First Mount Vernon Industrial Loan Association (" FMV" ). The Stancils initially sought to prevent FMV from foreclosing on a commercial property that the Stancils had purchased. After the trial court declined to prevent a foreclosure sale, the Stancils sought to recover damages, claiming among other things that FMV had made fraudulent misrepresentations and had breached an oral agreement to forbear from foreclosure. The trial court granted FMV's motion to dismiss the amended complaint for failure to state a claim, and the Stancils appealed. We affirm in part and reverse in part.

         I.

          Because we are reviewing an order granting a motion to dismiss for failure to state a claim, we take the facts as alleged in the complaint. Jordan Keys & Jessamy, LLP v. St. Paul Fire & Marine Ins. Co., 870 A.2d 58, 62 (D.C. 2005). According to the complaint, the Stancils borrowed $500,000 from FMV in April 2009 to purchase a property in the District of Columbia. The note executed in connection with the transaction provided for an annual interest rate of 18% and a default annual interest rate of 24%.

         After concluding that the Stancils were in default, FMV took steps to foreclose on the property. In June 2011, however, the Stancils and FMV entered into an oral contract pursuant to which the Stancils paid FMV $170,000 and FMV agreed to modify the terms of the note and to forbear from foreclosing on the property. The $170,000 payment reflected a $100,000 charge for attorney's fees, a $20,000 fee to FMV, and $50,000 payment as consideration for the forbearance agreement. The $100,000 charge for attorney's fees related to a provision in the note making the Stancils responsible, in the event of a default, for " all costs of collections, including . . . attorney's fees of at least 20% of the outstanding indebtedness . . . ." Before the Stancils made the $170,000 payment, FMV promised to reduce the forbearance agreement to writing, and the Stancils relied on that promise in making the payment. Despite its promise, FMV failed to reduce the forbearance agreement to writing. FMV later foreclosed on the property, which was sold in January 2012.

         In pertinent part, the complaint raises the following claims: (1) fraudulent misrepresentation with respect to the $100,000 charge for attorney's fees, because there was no evidence that FMV incurred expenses for attorney's fees, and the " fee was unnecessary, inappropriate, . . . not default service related[,] and . . . clearly fraudulent . . . ." ; (2) fraudulent misrepresentation with respect to the $50,000 payment for foreclosure forbearance, because FMV refused to acknowledge receipt of the payment; (3) wrongful foreclosure, because

Page 870

the foreclosure violated various statutory requirements and was a breach of the oral forbearance agreement; (4) breach of the oral forbearance agreement; and (5) fraudulent misrepresentation, because FMV never intended to honor the oral forbearance agreement.[1]

         The trial court granted FMV's motion to dismiss the complaint for failure to state a claim. As to the claim of fraudulent misrepresentation with respect to the $100,000 charge for attorney's fees, the trial court concluded that the Stancils had not identified any false statement upon which they had relied. As to the claim for wrongful foreclosure, the trial court rejected the Stancils' statutory claims, which the Stancils have not renewed on appeal. The trial court did not expressly address the Stancils' claim that the foreclosure was wrongful because it violated the oral forbearance agreement.[2] As to the claim of breach of the oral forbearance agreement, the trial court relied on the statute of frauds, D.C. Code § 28-3502 (2012 Repl.) (action may not be brought to enforce agreement concerning real estate unless agreement is in writing). The trial court acknowledged that oral agreements concerning real estate may in some circumstances be enforceable on estoppel grounds, but saw no basis for estoppel in this case. Finally, with respect to the claims of fraudulent misrepresentation regarding the oral forbearance agreement, the trial court relied on the parol-evidence rule, which precludes introduction of " extrinsic or parol evidence which tends to contradict, vary, add to, or subtract from the terms of a written contract . . . ." Segal Wholesale, Inc. v. United Drug Serv., 933 A.2d 780, 783 (D.C. 2007) (internal quotation marks omitted).

         II.

          This court reviews de novo the trial court's decision to dismiss a complaint for failure to state a claim. See Jordan Keys & Jessamy, 870 A.2d at 62. We accept the allegations in the complaint as true and view all facts and draw all reasonable inferences in favor of the plaintiff. Id.

         A.

         We affirm the trial court's dismissal of the claim of fraudulent misrepresentation as to the $100,000 charge for attorney's fees (count II). " To prove a claim of fraudulent misrepresentation, [plaintiffs] must prove (1) a false representation, (2) in reference to a material fact, (3) made with knowledge of its falsity, (4) with the intent to deceive, and (5) action taken by [the plaintiffs] in reliance upon the representation, (6) which consequently resulted in provable damages." Railan v. Katyal, 766 A.2d 998, 1009 (D.C. 2001) (internal quotation marks omitted). With respect to the charge for attorney's fees, the trial court correctly concluded that the Stancils did not identify any fraudulent misrepresentation upon which they detrimentally relied. To the contrary, the $100,000 charge was based on the express language of the note, which provides that, in the event of a default, the ...


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