1. Yes, the homeowners can sue the bank for breaking its promise. The judge said that even though the bank didn't promise a specific new loan, it did make a very specific promise to *consider* them for one if they stopped paying. The bank tricked the Dixons into a bad situation just so it could take their house. That's extremely unfair, and the law can step in to fix that injustice.
2. No, the federal law doesn't stop this lawsuit. The judge explained that the Dixons aren't trying to change the big rules for how banks operate. They are just using a basic, common-sense state law that says people and companies have to keep their promises. This lawsuit is about basic fairness, which applies to everyone, not special banking regulations.

Yes, the Dixons' case can move forward. Their complaint shows a claim for 'promissory estoppel.' That's when you can hold someone to a promise, even if it's not a full contract, because it would be unfair not to. 

Wells Fargo's promise to talk about changing the loan if the Dixons stopped paying was clear enough that the Dixons reasonably relied on it. It's not fair to let Wells Fargo back out now just because the promise wasn't super detailed. 

The judge explains that Massachusetts courts will enforce promises if it looks like one side was trying to take advantage of the other. Here, Wells Fargo got the Dixons to default so it could foreclose. That's unfair tactics. 

Wells Fargo argued a federal lending law blocks this claim. But the judge said this state law claim is allowed because it's not really regulating lending, just making Wells Fargo act honestly like any business should. It fits an exception.

While such a claim is doubtful, at best, at a minimum the complaint does not identify what "words" or "deeds" formed the basis of those promises, nor are the alleged promises to follow policy sufficiently specific to support a claim for promissory estoppel.

—the mode of "functional analysis" laid out in Dixon is nonetheless consistent with the Ninth Circuit.

In that case, the plaintiff-borrower alleged that the defendant-lender promised that if plaintiff defaulted and provided certain financial information, the defendant would consider a loan modification in the plaintiff's behalf.

—i] t is no appropriate part of judicial business to rewrite contracts freely entered into between sophisticated business entities

Finally, "the putative promise, like any offer, must be sufficiently definite and certain in its terms to be enforceable."

In Dixon, the district court entered a lengthy and scholarly Opinion which concluded that the plaintiff homeowners could maintain a cause of action for promissory estoppel where the gravamen of their complaint was that the bank holding their mortgage "promised to engage in negotiations to modify their loan, provided that they took certain `steps necessary to enter into a …

Although HOLA broadly preempted state lending regulations, HOLA did not preempt state laws that prescribe general legal duties applicable to all businesses.

The plaintiffs thus "stopped making payments on their loan and submitted the requested financial information-only to learn subsequently that the bank had initiated foreclosure proceedings against them."

Vermont courts have not addressed whether a promise to negotiate in good faith under a promissory estoppel rationale, but there is support for that proposition in other jurisdictions.

Because chapter 93A regulates the conduct of businesses generally, rather than lenders specifically, it is not preempted under section 560.2 (b).

1. Yes, a lender's promise to consider a homeowner for a loan modification can create an enforceable claim for promissory estoppel under these circumstances. While Massachusetts law is reluctant to enforce indefinite 'agreements to agree,' promissory estoppel can apply where a specific promise induces detrimental reliance and injustice can only be avoided by enforcement. Here, Wells Fargo made a specific promise to consider the Dixons for a modification if they defaulted and submitted financial documents. The Dixons' reliance was foreseeable, and by inducing them to default, Wells Fargo gained the advantage of being able to foreclose. This conduct, described as 'unseemly' and 'dangling the other side on a string,' creates an injustice that the doctrine of promissory estoppel is designed to remedy, even if the final terms of the modification were left for future negotiation.
2. No, the Dixons' state-law promissory estoppel claim is not preempted by HOLA. HOLA's preemption is broad but preserves traditional state common-law claims, like contract and tort law, that do not attempt to regulate lending activities. The Dixons' claim does not seek to impose new substantive requirements on Wells Fargo’s loan servicing or modification processes; rather, it seeks to enforce a generally applicable duty to honor promises on which others have detrimentally relied. Enforcement of such a claim complements, rather than interferes with, the federal regulatory scheme and prevents lenders from using preemption as a shield for unconscionable conduct.

Yes, the Dixons' complaint states a claim for promissory estoppel because Wells Fargo's promise to engage in negotiations for a loan modification, if the Dixons defaulted on their payments and provided certain financial information, was a promise that the Dixons reasonably relied upon to their detriment. The promise was sufficiently definite and certain in its terms to be enforceable. 

Young explains that while Massachusetts courts have been reluctant to enforce vague agreements to agree, they have applied promissory estoppel where the facts suggest the promisor's words or conduct were designed to take advantage of the promisee. The promisor need not have acted fraudulently or in bad faith - facts falling short of these elements may still constitute conduct contrary to principles of fair dealing that courts aim to enforce. 

Here, Wells Fargo convinced the Dixons to default to be eligible for a modification, and it was only because of their reliance on this representation that Wells Fargo was able to initiate foreclosure. While there is no allegation Wells Fargo's promise was dishonest, it distinctly gained the upper hand by inducing the Dixons to open themselves up to foreclosure. In telling the Dixons that defaulting and submitting financial information were necessary steps to modify their loan, Wells Fargo should have known and intended the Dixons would take those steps believing their fulfillment would lead to a modification. The bank's promise to consider them for a modification necessarily involved an undertaking not to foreclose based on facts coming into existence solely from the making of that promise. 

Furthermore, the state-law claim of promissory estoppel is not preempted by HOLA because it does not impose any substantive requirement on the loan modification process and is a traditional state-law claim that only incidentally affects lending. The court's functional analysis is consistent with other jurisdictions, recognizing that while HOLA broadly preempts state lending regulations, it does not preempt state laws that prescribe general legal duties applicable to all businesses. Enforcing Wells Fargo's promise merely requires the lender to deal fairly and honestly, which no more burdens lending operations than everyday business transactions.

Dixon v. Wells Fargo Bank, N.A.

Case Podcast

Rule of Law:

The Legal Principle

Facts:

Procedural Posture:

How It Got Here

Issue:

Legal Question at Stake

Opinions:

Majority, Concurrences & Dissents

Analysis:

Why This Case Matters

Gunnerbot