Cengage Advantage Books: Fundamentals of Business Law 9th Edition by Roger LeRoy Miller

Exercise 11

A Question of Ethics Claudia Aceves obtained a loan of $845,000 to buy a home in Los Angeles, California. Less than two years into the loan, Aceves could no longer afford the monthly payments. U.S. Bank, which held her mortgage, declared her in default and notified her that it planned to foreclose on her home. (Foreclosure is a process that allows a lender to repossess and sell the property that secures a loan.) Aceves filed for bankruptcy. Filing a petition in bankruptcy automatically stays, or suspends, any action by a mortgagee (lender) against the debtor. Aceves hoped to set up a new, affordable schedule of payments. On learning of the filing, U.S. Bank offered to modify Aceves's mortgage if she would forgo bankruptcy. In reliance on that promise, she allowed the bankruptcy court to lift the automatic stay. Once the stay was lifted, the bank did not work with Aceves to modify her loan. Instead, it foreclosed on her home and initiated eviction proceedings. She filed a lawsuit in a California state court against the bank, alleging a cause of action for promissory estoppel. [ Aceves v. U.S. Bank, N.A., 129 Cal.App.4th 218, 120 Cal.Rptr.3d 507 (2 Dist. 2011)]
1 Is Aceves likely to succeed in her claim of promissory estoppel? Why or why not? How does this theory relate to the ethical principles discussed in Chapter 3?
2 Did either the borrower or the lender-or both-behave unethically in the circumstances of this case? Explain.