Consumer Finance Litigation

In Cowen Loan Servicing, LLC v. Jean Marie Delvar, 4D14-763, 2015 WL 8347300 (Fla. 4th DCA Dec. 9, 2015) the borrower alleged that he had been offered a loan modification and accepted and relied on that offer by making loan payments in accordance with the offered terms. The trial judge found that this was sufficient to state a defense to foreclosure on promissory estoppel principals and entered an order reforming the mortgage to reflect the alleged new terms. Ocwen appealed the judgment of the trial court. In reversing the trial court, the Fourth District Court of Appeal held that the trial judge's ruling violated Florida's State of Frauds, Fla. Stat. 725.01 which provides that: No action shall be brought . . . upon any agreement that is not to be performed within the space of 1 year from the making thereof . . . unless the agreement or promise upon which such action shall be brought, or some note or memorandum thereof shall be in writing and signed by the party to be charged therewith or by some other person by her or him thereunto lawfully authorized. The Fourth District Court of Appeal also rejected the trial courts holding that the application of the above statute could be avoided on promissory estoppel grounds. Specifically the Fourth District Court of Appeal quoted DK Arena, Inc. v. EB Acquisitions I, LLC, 112 So. 3d 85, 97 (Fla. 2013) which holds "application of the Statute of Frauds is a matter of legislative prerogative; the judicial doctrine of promissory estoppel may not be used to circumvent its requirements." This opinion is interesting because the statute of frauds was used to prevent a defensive application of the oral modification under an estoppel theory. Indeed, the recitation of facts in the opinion notes that an answer and affirmative defenses was filed, and makes no mention of a counterclaim. Prior appellate opinions have suggested that the statute of frauds does not apply in a defensive context where oral modification is alleged as a basis for promissory estoppel. See e.g. Maynard v. Cent. Nat. Bank, 640 So. 2d 1212, 1213 (Fla. 5th DCA 1994). However, the Florida Supreme Court's ruling in DK Arena as interpreted by the Fourth District Court of Appeal in Delvar casts serious doubt on the continuing validity of the older line of cases which hold the statute of frauds is inapplicable to defensive assertions using an estoppel theory. Going forward, practitioners would do well object to any allegations of an oral agreement to modify an agreement within the statute of frauds, whether it is set forth as a breach of contract counterclaim or in a defensive capacity as promissory estoppel. Continued reliance on old cases suggesting the statute of frauds has no application against a defensive assertion of oral modification and equitable considerations seems inherently risky given the more recent treatment of the issue by Florida's appellate courts. A copy of the Fourth District Court of Appeal's opinion in Delvar can be found here.