563 B.R. 812
Bankr. E.D. Va.2017Background
- Debtor filed Chapter 11 in 2010, listed a residence held in trust; court repeatedly found the property was not estate property.
- Bankruptcy plan confirmed in 2012 contemplated sale of the property and payment of Nationstar’s secured claim; sale closed in August 2014 and Nationstar received proceeds.
- Debtor later objected to Nationstar’s proof of claim; the court disallowed the balance after Nationstar did not respond.
- Debtor sued Nationstar in 2016 alleging delays in approving a short sale (Jan 2013–Aug 2014) and various fraud, bad faith, and statutory violations.
- Several claims were dismissed by consent or prior bench ruling; the opinion addresses remaining Counts I (background), IV (bad faith), VI (constructive fraud), VIII (actual fraud based on intent not to perform), and XV (failure to comply with federal housing regulation).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Count I — Background as standalone claim | Background allegations support other counts; seeks recognition as independent claim | Not an independent cause of action | Dismissed; court will consider allegations for other counts |
| Count IV — Breach of implied covenant of good faith | Nationstar delayed/blocked short sale in bad faith | No contractual duty to approve short sale; covenant cannot override express terms | Dismissed; short sale was not contractually required and covenant cannot rewrite express terms |
| Count VI — Constructive fraud for failing lender duties | Nationstar misrepresented status as transferee/holder and failed lender duties | Allegations lack particularity and plaintiff abandoned holder claim; no specific misrepresentations pleaded | Dismissed for failure to plead fraud with particularity and absence of false representations |
| Count VIII — Actual fraud (intent not to perform) | Nationstar represented it would perform duties but intended not to | No specific fraudulent statements pleaded; plaintiff concedes holder status | Dismissed for failure to plead the who/what/when/where/how of alleged fraud |
| Count XV — Violation of federal housing regulation (24 C.F.R. §203.604(b)) | Deed of Trust incorporated HUD rules; Nationstar failed to hold face-to-face interview before three payments were missed | Deed does not expressly incorporate HUD regs; loan is Fannie/Freddie type, not FHA-insured; regulation inapplicable | Dismissed; Deed’s general “applicable law” language insufficient and HUD rule does not apply to this loan |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading must state a plausible claim)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (complaint must allege plausible claims)
- Walters v. McMahen, 684 F.3d 435 (courts need not accept legal conclusions)
- Va. Vermiculite Ltd. v. W.R. Grace & Co., 156 F.3d 535 (duty of good faith limits exercise of contractual discretion)
- Charles E. Brauer Co., Inc. v. Nations-Bank of Va., N.A., 251 Va. 28 (breach of good faith produces contract claim, not independent tort)