## Facts

- Claudia Jacqueline Aceves obtained an adjustable-rate mortgage secured by a deed of trust on her residence; the loan interest was later transferred to U.S. Bank, N.A., as trustee.
- After defaulting, U.S. Bank began nonjudicial foreclosure proceedings under the deed of trust’s power of sale.
- Aceves filed a Chapter 7 bankruptcy petition, triggering an automatic stay that halted foreclosure, and she intended to convert to Chapter 13 to cure arrears and reinstate the loan with financial help from her husband.
- During the Chapter 7 case, Aceves contacted U.S. Bank; she alleged the bank promised it would work with her on loan reinstatement and modification if she would forgo further bankruptcy proceedings.
- Relying on that promise, Aceves did not convert to Chapter 13 and did not oppose U.S. Bank’s motion to lift the automatic stay.
- The bankruptcy court lifted the stay; U.S. Bank continued foreclosure notice procedures and scheduled a trustee’s sale.
- Close to the sale date, the servicer sent modification paperwork, and the day before the sale a bank negotiator proposed a payment nearly double Aceves’s prior payment; she rejected it as unaffordable.
- The property was sold at a trustee’s sale, and Aceves was required to vacate; she alleged she lost the opportunity to save her home through Chapter 13 protections.

## Issues

1. Whether Aceves sufficiently pleaded promissory estoppel based on U.S. Bank’s alleged promise to work with her on reinstatement and modification if she refrained from pursuing Chapter 13 and did not oppose lifting the bankruptcy stay.
2. Whether Aceves sufficiently pleaded fraud based on an alleged promise made without intent to perform, used to induce her to surrender bankruptcy protections while foreclosure proceeded.
3. Whether the trial court properly sustained the demurrer without leave to amend as to Aceves’s other claims seeking to undo the trustee’s sale and obtain related relief.

## Decision

- The Court of Appeal reversed the dismissal in part and remanded for further proceedings.
- It held Aceves adequately pleaded promissory estoppel: a sufficiently definite promise to work with her, reasonable and foreseeable reliance in foregoing bankruptcy rights, and detriment from the ensuing foreclosure.
- It held certain fraud-based allegations were adequately pleaded to the extent they alleged a misrepresentation of present intent (a promise allegedly made with no intent to negotiate in good faith).
- It agreed that not all pleaded causes of action were adequately stated and did not reinstate every claim.

## Legal Principles

- Promissory estoppel requires: (1) a clear and unambiguous promise, (2) reasonable and foreseeable reliance, and (3) detriment caused by the reliance.
- A promise to “work with” a borrower on reinstatement/modification can be sufficiently definite at the pleading stage when tied to a specific request that the borrower relinquish legal rights, even if no specific loan terms are promised.
- Foregoing bankruptcy rights (such as conversion to Chapter 13 and opposition to stay relief) may constitute cognizable detrimental reliance when it results in loss of an opportunity to cure arrears and prevent foreclosure.
- Promissory estoppel may, in appropriate circumstances, permit liability based on detrimental reliance on an oral promise notwithstanding statute-of-frauds arguments at the pleading stage.
- Promissory fraud may be stated by alleging a promise made without intent to perform, intended to induce reliance that results in harm.

## Conclusion

The court held that a borrower can proceed past demurrer on promissory estoppel and related promissory fraud theories where a lender allegedly induced the borrower to abandon bankruptcy protections by promising to work toward reinstatement or modification and then proceeded to foreclosure contrary to that induced reliance.


Aceves v. U.S. Bank, N.A., 192 Cal. App. 4th 218, 120 Cal. Rptr. 3d 507 (Ct. App. 2011)