## Facts

- Bernabe Tolosa and Elizabeth Tolosa obtained a residential mortgage loan of about $276,000 from HSBC Bank USA, N.A. to purchase real property in Texas.
- The loan was evidenced by a promissory note and secured by a deed of trust.
- The borrowers defaulted on the loan.
- HSBC foreclosed on the property.
- After the foreclosure, the borrowers sued seeking to delay post-foreclosure eviction proceedings.
- The borrowers asserted multiple claims, including promissory estoppel, based on an alleged promise that the bank would not foreclose while the borrowers were in a loan-modification process.
- HSBC moved to dismiss, arguing the claims were barred by the statute of frauds because the alleged agreement not to foreclose (or to modify the loan) was not in a signed writing.

## Issues

1. Whether the borrowers could pursue claims based on the bank’s alleged oral promise not to foreclose during loan-modification discussions, or whether the statute of frauds barred reliance on that unwritten credit-related promise.

## Decision

- The court granted the bank’s motion to dismiss.
- The court held that, because the alleged promise concerned a loan transaction and was not memorialized in a writing signed by the bank, the statute of frauds barred the borrowers’ effort to enforce or give legal effect to the alleged oral agreement through promissory estoppel and related theories.
- The case was dismissed.

## Legal Principles

- Under Texas law, certain agreements involving the making, modification, or forbearance of repayment of a loan above a statutory threshold must be in writing and signed by the party to be charged to be enforceable.
- An alleged agreement to postpone foreclosure in connection with a loan-modification process is treated as the type of credit-related agreement that falls within the statute of frauds’ writing requirement.
- Promissory estoppel generally does not avoid the statute of frauds when it is used to enforce an oral agreement that the statute requires to be written; it may apply only in the narrower circumstance where the alleged promise is to sign a statute-compliant written agreement.
- Claims that depend on proving and enforcing an oral credit-related promise may be dismissed when the statute of frauds makes that promise unenforceable.

## Conclusion

Tolosa v. HSBC Bank USA, N.A. dismissed borrowers’ post-foreclosure claims because the alleged oral assurance not to foreclose during loan-modification discussions was not contained in a signed writing and therefore could not support promissory estoppel or other claims premised on enforcing that unwritten agreement.


Tolosa v. HSBC Bank USA, N.A., 2011 WL 13244704 (2011)