Opinion
B232672
12-21-2011
YVONNE MERCADO, Plaintiff and Appellant, v. ONE WEST BANK, FSB, et al., Defendants and Respondents.
Robert J. Spitz for Plaintiff and Appellant. Foley & Mansfield, Stephen S. Chuck, Tiffany M. Birkett, Victoria J. Tsoong for Defendants and Respondents.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Los Angeles County Super. Ct. No. VC057987)
APPEAL from a judgment of the Superior Court of Los Angeles County. Yvonne T. Sanchez, Judge. Affirmed.
Robert J. Spitz for Plaintiff and Appellant.
Foley & Mansfield, Stephen S. Chuck, Tiffany M. Birkett, Victoria J. Tsoong for Defendants and Respondents.
A mortgagor defaulted on her home loan. She is now suing the bank for alleged procedural missteps in issuing the notice of default and the notice of trustee's sale. None of her claims survive scrutiny. We affirm the trial court's dismissal of this case.
FACTS
In 2007, appellant Yvonne Mercado purchased a home in La Mirada. In connection with her purchase, Mercado signed a deed of trust creating a security interest, for a loan in the amount of $332,500. Mercado states, "Due to financial circumstances beyond her control and caused by the general economic recession, Plaintiff fell behind in her mortgage payments on the Loan in or about April 2010." On August 13, 2010, a notice of default and election to sell was recorded against Mercado's home.
On August 25, 2010, Mercado's deed of trust was assigned to respondent One West Bank (the Bank). In September 2010, Quality Loan Service Corporation (QLS) became the substitute trustee on the deed of trust. Mercado alleges that at no time prior to filing the notice of default did a bank representative contact her to discuss loan modification options available to her. However, as an exhibit to her complaint Mercado attaches a July 30, 2010, declaration from the lender, stating that Mercado was contacted to discuss her financial situation and explore options to avoid foreclosure.
Despite alleging that no one ever contacted her about a loan modification, Mercado's complaint states that she applied for and went through the loan modification process. Mercado provided all of the financial information and documentation that was requested of her. She attempted to obtain a formal, written loan modification agreement, to no avail, despite receiving promises and assurances that she qualified for a modification. Mercado states that she relied upon promises that she was entitled to a loan modification, to her detriment.
On January 24, 2011, Mercado filed suit against respondents. She alleges that the Bank violated the California Mortgage Relief Act and the California Foreclosure Prevention Act, and on that basis she seeks declaratory relief and to cancel the trustee's deed upon sale. Mercado also alleges claims for negligent and intentional misrepresentation, breach of contract, statutory violations, and unfair business practices. Mercado attempted to halt the trustee's sale by filing an application for a preliminary injunction. The trial court denied her request.
Respondents demurred to Mercado's complaint, arguing that they fully complied with state law regarding foreclosure proceedings; that Mercado was not deceived; that she breached the loan contract by failing to make mortgage payments; and that she has not suffered any injury because she continues to reside in the mortgaged property. The trial court sustained respondents' demurrers without leave to amend on March 30, 2011. Mercado filed her notice of appeal on April 21, 2011. An order of dismissal was signed by the trial court and filed on April 26, 2011.
DISCUSSION
1. Appeal and Review
Appeal lies from a dismissal order after demurrers are sustained without leave to amend. (Code Civ. Proc., §§ 581d, 904.1, subd. (a)(1); Serra Canyon Co. v. California Coastal Com. (2004) 120 Cal.App.4th 663, 667.) We review de novo the ruling on the demurrer, exercising our independent judgment to determine whether a cause of action has been stated as a matter of law. (Desai v. Farmers Ins. Exchange (1996) 47 Cal.App.4th 1110, 1115.) The trial court's refusal to grant plaintiff leave to amend the pleading is reviewed for an abuse of discretion. Plaintiff has the burden of establishing a reasonable possibility that an amendment to the pleading would cure any defects, and may make that showing for the first time on appeal. (Trinity Park, L.P. v. City of Sunnyvale (2011) 193 Cal.App.4th 1014, 1027; Smith v. State Farm Mutual Automobile Ins. Co. (2001) 93 Cal.App.4th 700, 711.)
2. Mercado's Claims
a. Claimed Violation of Mortgage Foreclosure Statutes
Mercado's first cause of action seeks to cancel the trustee's deed for violation of state foreclosure statutes. Her sixth cause of action similarly alleges a violation of the foreclosure statues. The trial court sustained demurrers to these claims because Mercado pleaded no facts to indicate that (1) a foreclosure sale has occurred, or (2) the foreclosure statutes were violated.
Mercado concedes that her first cause of action to cancel the trustee's deed upon sale is premature: there was no foreclosure sale, so there is no trustee's deed upon sale to cancel. She asks to amend the complaint to delete the language regarding a foreclosure sale, and to allege instead that she seeks to cancel the notice of default and the notice of trustee's sale. The alleged basis for cancelling the notice of default and the notice of trustee's sale is that the Bank failed to contact Mercado to discuss her options and assess her financial situation. Mercado writes, "The Complaint can be amended to specifically state that the required contacts and attempts to make contact with the borrower did not take place prior to issuing the Notice of Default."
A mortgagee, trustee, beneficiary or authorized agent may not file a notice of default unless it contacts the borrower—in person or by telephone—"in order to assess the borrower's financial situation and explore options for the borrower to avoid foreclosure." (Civ. Code, § 2923.5, subd. (a)(1)-(2), (g).) The statute "does not actually require that a lender modify a defaulting borrower's loan. Instead, it contemplates contact and some analysis of the borrower's financial situation." (Davenport v. Litton Loan Servicing, LP (N.D. Cal. 2010) 725 F.Supp.2d 862, 877.) Mercado's complaint alleges that the Bank was in contact with Mercado and considered—but did not approve—Mercado's application for a loan modification. Because the complaint shows on its face that the borrower and lender discussed a loan modification, "the facts pleaded actually negate a claim that section 2923.5 was violated." (Ibid.)
All undesignated statutory references in this opinion are to the Civil Code.
Counsel for Mercado devoted considerable effort at oral argument to the notion that One West Bank is some sort of interloper, claiming that he has "never seen" any document assigning Mercado's trust deed to the Bank. We direct counsel's attention to the "Assignment of Deed of Trust" transferring the beneficial interest in Mercado's trust deed to the Bank, signed and notarized on August 25, 2010, and recorded on August 27, 2010, found in respondent's appendix at pages 153-155. This was an exhibit to the Bank's request for judicial notice filed in superior court on February 25, 2011. The courts may take judicial notice of publicly recorded documents. (Evid. Code, § 452, subd. (h); Evans v. California Trailer Court, Inc. (1994) 28 Cal.App.4th 540, 549.)
Mercado claims that "the Notice of Default and the Notice of Trustee Sale were not properly issued by a lender, beneficiary or trustee of the Deed of Trust or any of their agents." QLS was substituted in as trustee on September 7, 2010, 25 days after the notice of default was signed and recorded. Mercado contends that QLS "was not the Trustee under the Deed of Trust at the time it signed and recorded the Notice of Default, making that notice void ab initio and in violation of Civil Code Section 2924." Mercado does not dispute the contents of the notice of default.
A notice of default may be filed by a "trustee, mortgagee, or beneficiary, or any of their authorized agents." (§ 2924, subd. (a)(1), italics added.) QLS did not send the notice of default to Mercado as "trustee." Rather, the notice of default is signed by QLS "as agent for beneficiary." Because section 2924 expressly allows a notice of default to be filed by "authorized agents" for the beneficiary, there was no statutory violation. Mercado has not alleged (nor does she propose to allege) that she was in any way prejudiced when QLS signed the notice of default as agent for the beneficiary under the deed of trust. (See Melendrez v. D & I Investment, Inc. (2005) 127 Cal.App.4th 1238, 1258 [requiring a prejudicial procedural irregularity with respect to a nonjudicial foreclosure sale].)
b. Claim for Declaratory Relief
Mercado seeks a judicial determination of her rights and the Bank's obligations, in particular its obligation to provide her with a loan modification agreement. She alleges that there is an actual controversy because respondents failed to conduct the requisite inquiry into her financial situation, and failed to negotiate in good faith an affordable loan modification, before recording a notice of default. Declaratory relief operates prospectively. It cannot be granted "'where only past wrongs are involved.'" (Baldwin v. Marina City Properties, Inc. (1978) 79 Cal.App.3d 393, 407.)
As discussed in the preceding paragraph, respondents did not violate the foreclosure statutes. The complaint shows on its face that the Bank (or its predecessor in interest) communicated with Mercado regarding her financial situation, and she applied for a loan modification. The Bank was under no obligation to modify Mercado's contractual obligation. Mercado's declaratory relief claim is based on acts that occurred in the past.
c. Claims for Misrepresentation
A claim for misrepresentation must be pleaded with particularity, and include facts showing "'"how, when, where, to whom, and by what means the representations were tendered."'" (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) Without providing specifics as to what misrepresentations were made, who made them, and when they occurred, Mercado alleges that Bank representatives orally assured her that she would qualify for a loan modification, and she relied on the Bank's representations. Mercado does not indicate how she relied on the Bank's representations, or what detriment was caused by her reliance. On appeal, Mercado seeks an opportunity to amend her complaint to allege fraud with greater specificity and give "more facts about the who, when, where and what," as she suggests in her brief.
Mercado "was led to believe that [s]he was being considered for a loan modification and in reliance thereon Plaintiff, Mercado[,] was waiting for the terms and conditions to be implemented when Defendants instead planned to hold the foreclosure sale." In the context of a fraud claim by a borrower, the Bank's representation that Mercado "was being considered for a loan modification" has no legal effect. "The terms of a restructuring agreement obviously may vary as widely as the terms of the original agreement. . . . 'Preliminary negotiations or an agreement for future negotiations are not the functional equivalent of a valid, subsisting agreement.'" (Price v. Wells Fargo Bank (1989) 213 Cal.App.3d 465, 483.) In Price, a bank misrepresented that it "'would "work with" the plaintiffs in the matter of repayment of the promissory notes . . . .'" (Id. at pp. 479-480.) The court found that "The Prices' understanding that the notes would be 'redone' [ ] raises no triable issue as to a legally enforceable understanding inconsistent with the written terms of the notes." (Id. at p. 483.)
At the time of the alleged misrepresentation, Mercado was admittedly in breach of her loan contract. To avoid foreclosure, she had to cure her default, yet she does not allege that she paid any consideration to secure an agreement to alter the terms of the loan contract. Mercado could not justifiably rely on an oral representation about a possible future attempt to negotiate a loan work-out to supplant her existing contractual duty. In the very least, she had to make monthly loan payments to show reliance upon the Bank's representation that she "was being considered" for a loan modification.
Mercado cannot establish the element of actual damage. "Misrepresentation, even maliciously committed, does not support a cause of action unless the plaintiff suffered consequential damages." (Conrad v. Bank of America (1996) 45 Cal.App.4th 133, 159.) Mercado's discussions with the Bank did not result in an amendment to the existing loan agreement. Her claimed damages all relate to her inability to repay her loan, rather than any detriment caused by the Bank's short-lived statements that it would consider her for a loan modification. Mercado does not claim that she was in a financial position to tender full repayment on the note, or qualified for a new loan from another bank, after receiving the default and foreclosure notices. Mercado was not in any different position as a result of the Bank's alleged representation that she "was being considered" for a loan modification than she would have been if the Bank had adamantly refused to modify the loan. (Id. at pp. 159-160.) The Bank had no obligation to modify the loan after Mercado defaulted, which caused the note to accelerate and the full loan amount to become due.
d. Claim for Breach of Contract
The elements of a breach of contract claim are: (1) a contract; (2) plaintiff's performance of the contract (or excuse for nonperformance); (3) defendant's breach; and (4) resulting damage to the plaintiff. (Reichert v. General Ins. Co. (1968) 68 Cal.2d 822, 830.) Mercado claims that respondents breached the provisions of the deed of trust by failing to send her a written notice of default; by failing to follow the foreclosure laws; by waiving their right to proceed with a foreclosure by accepting payment of the indebtedness; by refusing to rescind the notice of trustee's sale; and by making oral promises to modify her loan. Notably, Mercado does not allege that she performed the contract by making the required monthly loan payments, or was excused from making those payments. Indeed, the complaint shows that Mercado breached the contract first, by defaulting on her payments. Thus, an essential element of Mercado's claim—her performance of the contract—is missing from the equation. (Hamilton v. Greenwich Investors XXVI, LLC (2011) 195 Cal.App.4th 1602, 1614.)
In any event, Mercado's claim that she failed to receive a notice of default is specious: the complaint shows on its face that Mercado knew she was in default since April 2010, which led her to apply for a loan modification. The allegation that respondents failed to follow the foreclosure laws is meritless, as discussed in subsection (a), ante. Because respondents did not violate the foreclosure laws, they have no obligation to rescind the notice of trustee's sale.
Mercado alleges that she "has tendered and offered to pay the entire Loan balance with interest by making affordable monthly mortgage payments . . . ." During the foreclosure process, a borrower can cure the default and reinstate the loan until five business days prior to the trustee's sale. (§ 2924c.) Mercado does not allege that she cured her default, in order to reinstate the loan. Instead, she wants the courts to rewrite the terms of her mortgage agreement, to give her "affordable monthly mortgage payments." The terms of a mortgage agreement are a matter of negotiation between the parties: the courts cannot unilaterally rewrite a mortgage agreement to make it more favorable to the borrower. A lender's supposed promise to provide an affordable loan is too vague and insufficient to show the existence of a contract. (Blanco v. American Home Mortgage Servicing, Inc. (E.D. Cal. 2009) 2009 U.S.Dist. Lexis 119338.)
Mercado attempts to allege a promissory estoppel theory, stating that she "detrimentally relied" on representations made by respondents regarding their loan modification program. Under the promissory estoppel doctrine, a promise is made to induce action or forbearance on the part of the promisee. (Platt Pacific, Inc. v. Andelson (1993) 6 Cal.4th 307, 320-321.) The promise "'must be clear and unambiguous.'" (Cotta v City and County of San Francisco (2007) 157 Cal.App.4th 1550, 1566; CalFarm Ins. Co. v. Krusiewicz (2005) 131 Cal.App.4th 273, 284.) Estoppel is disfavored, so the person asserting it must leave nothing to surmise or questionable inference. (Landberg v. Landberg (1972) 24 Cal.App.3d 742, 758-759.) The existence of an estoppel may be decided as a matter of law if there is only one conclusion to be drawn from the facts. (Id. at p. 759.) The doctrine is simply "'inapplicable where no clear promise is made.'" (Lang v. TIG Ins. Co. (1998) 68 Cal.App.4th 1179, 1185.)
Mercado does not allege a clear and unambiguous promise to modify her loan agreement. Rather, the Bank represented that it "would provide a written loan modification agreement to a qualified borrower." Mercado submitted an application for a modification that was ultimately denied, apparently because the Bank concluded that Mercado is not a qualified borrower. When a bank tells a borrower that she can apply for a loan modification, it is not a promise to approve the borrower's request. The applicant must first prove that he or she is a qualified borrower. Without an unequivocal promise to modify Mercado's loan, no claim for promissory estoppel can be maintained.
e. Claim of an Unfair Competition Law Violation
The Unfair Competition Law (UCL) prohibits "any unlawful, unfair or fraudulent business act or practice." (Bus. & Prof. Code, § 17200.) It embraces "'"anything that can properly be called a business practice and that at the same time is forbidden by law."'" (Rubin v. Green (1993) 4 Cal.4th 1187, 1200.) Mercado relies on respondents' alleged violation of the foreclosure statues (§§ 2923.5, 2924) as the basis for her UCL claim. As discussed in subsection (a), ante, respondents did not violate the foreclosure statutes, which removes the underpinning for Mercado's UCL claim.
DISPOSITION
The judgment is affirmed.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.
BOREN, P.J. We concur:
DOI TODD, J.
CHAVEZ, J.