Opinion
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
APPEAL from a judgment of the Superior Court of Los Angeles County Super. Ct. No. BC 325310 Jane L. Johnson, Judge. Reversed.
Michael B. Tannatt for Defendant and Respondent.
Dan Hogue for Plaintiff and Appellant.
ALDRICH, J.
INTRODUCTION
Barbara Walker appeals from the summary judgment entered in favor of defendant Washington Mutual Bank (Washington Mutual or the bank) in her action for breach of contract. We hold that the trial court abused its discretion in sustaining certain hearsay objections and that triable issues of material fact precluded summary judgment. We also conclude that Washington Mutual failed to carry its burden to demonstrate its entitlement to summary judgment as a matter of law. Accordingly, the judgment is reversed.
FACTUAL AND PROCEDURAL BACKGROUND
1. The factual predicate
The undisputed facts show that in April 1997, Walker entered into an agreement with Washington Mutual’s predecessor in interest Home Savings of America, FSB under which Walker purchased real property located in the Eagle Rock section of Los Angeles (the property) and assumed an existing mortgage secured by a first trust deed. The unpaid principal remaining on the mortgage was $204,681.82. The monthly payments at the time of Walker’s assumption were $1,371.86, and came due on the 20th of each month.
Walker fell behind in her payment obligations and in April 2001, the loan became delinquent. Washington Mutual issued a Notice of Default and scheduled a foreclosure sale for October 23, 2001.
Just before the foreclosure, on October 18, 2001, Walker entered into a Repayment Plan with Washington Mutual for the stated purpose of “cur[ing] the outstanding delinquency. . . .” Under the terms of the Repayment Plan, Walker was required to pay $11,774.84 by October 22, 2001 (the first installment payment), and $2,132.69 by November 22, 2001 (the second installment payment). The installment payments were to be applied to the oldest monthly payments due and the balance of the funds would be used to reduce any outstanding billed items included in the Repayment Plan. The parties agreed that if any provisions of the Repayment Plan conflicted with the terms of the underlying mortgage, that the Repayment Plan would prevail, but in all other respects, Walker’s loan documents remained in full force and effect. That is, the Repayment Plan stated it was not a novation of or a release of Walker’s obligations under the mortgage.
Walker made the two installment payments on the dates required by the Repayment Plan. However, Washington Mutual appears to have mislaid the first installment payment of $11,774.84. Because the first installment payment was not properly applied to the delinquency, Walker’s second installment payment of $2,132.69 was returned to her on November 30, 2001.
On February 28, 2002, Washington Mutual’s Cassie Inouye sent a letter to Walker apologizing for the bank’s failure properly to post the $11,774.84 payment to her loan, causing the second installment payment to be rejected. In the letter, Inouye assured Walker that Washington Mutual would deem Walker’s first installment payment to be sufficient to cure the default on Walker’s loan and reinstate her loan. Further, Inouye had instructed the trustee to rescind the foreclosure sale. Inouye stated she had requested that the credit reporting companies adjust Walker’s credit profile to reflect that the loan was reinstated effective October 2001 and that the payments were current.
The notice that the foreclosure sale was rescinded was recorded on March 12, 2002, by the trustee. Walker’s first payment of $11,774.87 was finally accounted for and posted to her loan around April 2002, according to Norman Shaw, Washington Mutual’s Assistant Vice-President for Servicing Delivery Research and Support. That installment payment was applied to late charges and the monthly payments for April through October or November 2001. As promised by Inouye, at some undisclosed date, Washington Mutual adjusted its report to the credit reporting agencies about Walker’s loan to reflect her second installment payment made in November 2001.
Washington Mutual credited only one more payment to Walker’s loan in the two years between December 1, 2001, and December 1, 2003. That payment was made on July 30, 2002, in the amount of $1,310. By then, in the bank’s view, Walker was seven months behind in her payments (December 20, 2001 through June 20, 2002) in the amount of $9,931.60, plus $1,163.14 for “corporate advances.” Where the July 30, 2002, payment was insufficient to bring Walker’s loan current, it was put into a “suspense” account. On July 1, 2002, Washington Mutual issued another notice of intent to foreclose.
Walker filed for bankruptcy protection under Chapter 13 on January 28, 2003 (the first bankruptcy filing), the day before Washington Mutual scheduled its foreclosure sale. Upon receipt of notice of the first bankruptcy filing, Washington Mutual canceled the foreclosure sale.
The Bankruptcy Court dismissed Walker’s case on May 5, 2003. Washington Mutual scheduled a new foreclosure sale for June 25, 2003.
On June 23, 2003, Walker filed a second petition for bankruptcy court protection under Chapter 13 (the second bankruptcy filing). Washington Mutual postponed the new foreclosure sale. On October 30, 2003, the Bankruptcy Court dismissed Walker’s second bankruptcy filing.
On December 5, 2003, Walker wrote to Washington Mutual’s Bill Erhlich asking for a postponement of the foreclosure proceedings until Erhlich could review a chronology of the events of Walker’s loan that Walker had prepared. In that chronology, Walker described her numerous attempts, beginning in February 2002 around the time of Inouye’s February 2002 apology letter, to make payments on her loan in person at Washington Mutual’s Glendale branch, and the bank’s refusals to accept those payments. Walker also listed attempts to call officers at Washington Mutual, which calls were not returned.
Washington Mutual placed a 90-day hold on its collection activity to investigate. Executive Liaison Melissa J. Sirovina wrote to Walker with the results of the research, asking for copies of receipts and correspondence reflecting Walker’s claim that Washington Mutual had been refusing Walker’s tender of payments over the previous two years. It received no response.
Washington Mutual then sold Walker’s loan to EMC Mortgage Corporation effective January 5, 2004. When Walker contacted them, both EMC and Washington Mutual insisted on full payment of the entire loan balance within 30 days in accordance with the loan’s acceleration provision. On February 28, 2004, Sirovina wrote to Walker outlining the history of Walker’s loan and explaining the reasons for Washington Mutual’s conclusion that the foreclosures was appropriate.
EMC sold the property for $404,100 at a trustee’s sale held on March 16, 2004. EMC paid the $130,403.57 surplus to Walker.
2. The lawsuit
Walker’s action against Washington Mutual ensued. Walker’s operative complaint alleged four causes of action, of which only the first is relevant to this appeal. Cast as breach of the Repayment Plan contract, the first cause of action alleged the difficulty Walker had in making the two installment payments under the Repayment Plan and the trustee’s sale of the property. Walker alleged “Plaintiff has performed all conditions, covenants, and promises required by her on her part to be performed in accordance with the terms and conditions of the [Repayment Plan]. [¶] . . . Defendants breached the [Repayment Plan] entered into with Plaintiff on October 18, 2001 by recording several Notices of Default; Notices of Trustee’s Sales, Notice of Intent to Foreclose; not crediting Plaintiff with the initial $11,744.84 payment made by Plaintiff on October 22, 2001 and by eventually selling Plaintiff’s home at public auction on March 16, 2004.” Walker alleges, as the result of Washington Mutual’s breach of contract, she lost her home and its equity, suffered irreparable damage to her credit by the foreclosure and bankruptcy filings, and incurred attorney fees and costs.
Walker does not challenge the trial court’s ruling with respect to her three tort causes of action.
After the case was at issue, Washington Mutual moved for summary judgment on the grounds, inter alia, that Washington Mutual did not breach the Repayment Plan agreement or cause her damages, with the result Walker could not show the necessary elements of her first cause of action. Washington Mutual submitted evidence and declarations, which are almost entirely undisputed.
In opposing the motion, Walker filed her declaration. Therein, Walker related her repeated attempts to make payments on her loan beginning at the time of Inouye’s apology letter, and Washington Mutual’s repeated refusal to accept her payments on the ground her account was in “suspense.” She attached to her declaration Washington Mutual’s computer-generated process notes. These submissions, Walker argued, supported her contention that Washington Mutual lost her first and second installment payments, and then did not credit her account with the payments and did not return her account to current for at least six months. The effect of this six-month delay was that her account was in “suspense.” The suspension prevented Walker from making any payments on her mortgage, thereby putting her back in default on the loan and virtually guaranteeing that it would go into foreclosure again.
Among the “process notes” that Washington Mutual produced, two are of importance here. An entry for Walker’s loan on April 30, 2002, stated: “Rec’d A WAMU offcl chk . . . dtd 4/26/02 in the amnt. of $11,774.84 fr Cassie Inouye with instruction to apply to suspense.” Another entry on May 30, 2002, stated: “Applied addtnl funds to pymnt via on line. . . do not touch suspense. Is undr processing already. No brrwr c/b. sending overnght lt fr final amnt and indication tht addtn’l collection efforts will commence if funds nt rcvd within 7 days. The fcrl has been cncld, the fees need to be reclassified to non-reco.” (Italics added.)
The trial court sustained Washington Mutual’s objections to Walker’s declaration, effectively excluding all of Walker’s testimony about her attempts to make payments on her loan and Washington Mutual’s refusal to accept those payments. The court then granted Washington Mutual’s motion. It held, with respect to the breach of contract cause of action, that Washington Mutual made a prima facie showing that it did not breach the Repayment Plan. Walker did not demonstrate a dispute of fact that Washington Mutual did not breach a contract. Walker’s failure to make any further payments under her loan resulted in the subsequent default and foreclosure. The court found that Walker cited no authority to support her position that Washington Mutual’s breach of the Repayment Plan, if it did occur, would have excused Walker’s performance under the loan documents. After entry of the judgment Walker filed her timely appeal.
CONTENTION
Walker contends that the trial court erred in summarily adjudicating the first cause of action for breach of contract in favor of Washington Mutual.
DISCUSSION
1. The law
a. Standard of review
Summary judgment is granted when a moving party establishes the absence of a triable issue of material fact and the right to entry of judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c); Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.) “ ‘ “ ‘We review the [superior] court’s decision to grant . . . summary judgment de novo.’ [Citation.]” [Citation.]’ [Citation.]” (Nathanson v. Hecker (2002) 99 Cal.App.4th 1158, 1162.)
In moving for summary judgment, a “defendant or cross-defendant has met his or her burden of showing that a cause of action has no merit if that party has shown that one or more elements of the cause of action, even if not separately pleaded, cannot be established, or that there is a complete defense to that cause of action.” (Code Civ. Proc., § 437c, subd. (p)(2); see also, Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at p. 853.) “The defendant ‘must show that under no possible hypothesis within the reasonable purview of the allegations of the complaint is there a material question of fact which requires examination by trial.’ [Citation.]” (Salazar v. Southern Cal. Gas Co. (1997) 54 Cal.App.4th 1370, 1376.)
“Only if the defendant makes the requisite showing does the court need to examine the plaintiff’s opposing papers . . . .” (Salazar v. Southern Cal. Gas Co., supra, 54 Cal.App.4th at p. 1376.) In such case, the burden shifts to the plaintiff to show a triable issue of material fact exists as to what cause of action or defense. (Code Civ. Proc., § 437c, subd. (p)(2).) To meet that burden, the plaintiff “ ‘ “shall set forth the specific facts showing that a triable issue of material fact exists as to that cause of action . . . .” ’ [Citations.] Where the plaintiff fails to satisfy this burden, judgment in favor of the defendant shall be granted as a matter of law. [Citation.]” (Lopez v. Baca (2002) 98 Cal.App.4th 1008, 1014; accord, Salazar v. Southern Cal. Gas Co., supra, at p. 1376.)
“Summary judgment is a drastic procedure, inasmuch as it denies the right of the opposing party to trial, and it thus should be used with caution. [Citation.] Therefore, the moving party’s papers are strictly construed, accepting as fact only those portions not contradicted by opposing papers, while the opposing party’s papers are liberally construed, all facts therein being accepted as true. [Citation.]” (Salazar v. Southern Cal. Gas Co., supra, 54 Cal.App.4th at p. 1376.)
b. The law of contracts
“A cause of action for damages for breach of contract is comprised of the following: (1) the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to plaintiff. [Citation.]” (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1388; accord, Armstrong Petroleum Corp. v. Tri-Valley Oil & Gas Co. (2004) 116 Cal.App.4th 1375, 1391, fn. 6.)
In moving for summary judgment, Washington Mutual demonstrated through its largely undisputed statement of facts that it recognized that Walker had timely performed her obligations under the Repayment Plan; it rescinded the foreclosure in March 2002; it applied Walker’s first and second installment payments to her account; and it corrected its report to the credit reporting agencies at some undetermined point. The trial court concluded, therefore, that Washington Mutual had carried its burden in moving for summary judgment. The court further ruled that it was undisputed that Walker failed to demonstrate her performance or excuse for nonperformance because she thereafter failed to make all but one payment against her mortgage for two years, causing her to default on her loan and lose her house to foreclosure.
2. The trial court erred in granting the summary judgment motion
a. The trial court abused its discretion in sustaining the bank’s hearsay objections to Walker’s declaration
Walker contends that the trial court abused its discretion in sustaining Washington Mutual’s hearsay objections to portions of her declaration that concerned her repeated efforts to tender payments to Washington Mutual and its refusal to accept her payments.
We review the trial court’s evidentiary rulings on summary judgment for abuse of discretion. (Walker v. Countrywide Home Loans, Inc. (2002) 98 Cal.App.4th 1158, 1169.)
Specifically, Washington Mutual objected to Walker’s statements that on February 23, 2002, “I spoke with Vera Agopian who refused to accept my payment and further refused to provide me with the manager’s name. . . . I was told by employees of [Washington Mutual] that they would not accept my payment because my account was in suspense.” The trial court ruled that these statements were hearsay.
Washington Mutual objected to Walker’s statement: “The employee[s] of [Washington Mutual] refused to accept my payments. During that time, I recall speaking with Arsen and Emik.” The court sustained Washington Mutual’s objection to this statement finding it was vague.
The court sustained Washington Mutual’s objection to the declaration that “[t]he employees of the branch were not cooperating with me and were making reference to my suspended account” finding it was argumentative and hearsay. (Italics added.)
Statements that are made by someone other than the witness testifying, and that are offered to prove the truth of the matter stated, is inadmissible hearsay, except as provided by law. (Evid. Code, § 1200.)
It follows that, “out-of-court statements not offered to prove the truth of the matter stated are not regarded as hearsay. . . . [T]hey are not within the hearsay rule at all.” (1 Witkin, Cal. Evidence (4th ed. 2000) Hearsay, § 5, p. 684, first italics added.) Thus, “[t]he hearsay rule is not implicated where the issue is whether certain things were said or done, and not whether those things were true or false. In such event, the out-of-court statement or conduct has independent legal significance (whether or not the content is true and despite the declarant’s credibility) and is admissible nonhearsay to prove the words were spoken or the act was done. Citation. ¶ ‘In these situations, the words themselves, written or oral, are “operative facts,” and an issue in the case is whether they were uttered or written.’ [Citations.]” (Wegner et al., Cal. Practice Guide: Civil Trials and Evidence (The Rutter Group (2006) ¶ 8:1042, pp. 8D-9 to 8D-10.)
Turning to Walker’s declaration, the italicized portions, (1) Washington Mutual’s “Vera Agopian . . . refused to accept my payment;” (2) “I was told by employees of [Washington Mutual] that they would not accept my payment;” (3) “the employee of [Washington Mutual] refused to accept my payments;” and (4) “The employees of the branch were not cooperating with me . . . . I was told each time that . . . they would not accept my money” are simply not hearsay. (Italics added.) The bank’s employees’ conduct in refusing to accept Walker’s payments have independent legal significance as conduct; they were not offered as statements. Nor are these italicized clauses vague. Hence, the trial court abused its discretion in sustaining the hearsay-based objections to these portions of Walker’s declaration.
b. In opposing summary judgment, Walker raised triable issues of fact about whether Washington Mutual breached the Repayment Plan
Analyzing Walker’s opposition, she carried her burden in opposing the summary judgment. (Code Civ. Proc., § 437c, subd. (p)(2).) Walker demonstrated that she performed her obligations under the Repayment Plan. It is undisputed that Walker timely made her two installment payments under that contract. But, the focus of Walker’s opposition is to dispute Washington Mutual’s assertions that it performed all of its obligations under that agreement. By its own admission, Washington Mutual did not post Walker’s installment payments to her account until at least April 2002, six months after Walker fully met her obligations under the Repayment Plan. (See fn. 2, infra.) The bank’s omission appears to have left Walker’s account in suspense between the default in the summer of 2001, and at least May 2002. Walker’s opposition demonstrated a triable issue of fact about whether Washington Mutual breached its obligation under the Repayment Plan to “cure the outstanding delinquency” by failing to bring her account current, which caused the bank’s employees to refuse her subsequent payments. Walker’s declaration, along with the chronology and the bank’s process notes, liberally construed (Salazar v. Southern Cal. Gas Co., supra, 54 Cal.App.4th at p. 1376), indicate that the bank refused to accept Walker’s attempts after December 2001 to make further payments on her mortgage as the result of Washington Mutual’s half-year delay in posting the installment payments. This, in turn, caused Walker to suffer the damages of defaulting on her loan, losing her house at a trustee’s sale, and incurring the expenses and fees associated with the foreclosure.
Stated another way, Washington Mutual failed to carry its burden to show its entitlement to summary judgment. (Code Civ. Proc., § 437c, subd. (p)(2).) Washington Mutual’s showing does not demonstrate, indisputably, that it performed all of its obligations under the Repayment Plan. Strictly construed, Washington Mutual’s showing indicates that the bank acknowledged receipt of Walker’s first and second installment payments and rescinded the foreclosure. But nowhere in Washington Mutual’s moving papers did it ever indicate that it corrected its internal records to show that Walker’s loan was current so as to enable her to make monthly payments after October 2001. All that the moving papers show is that six months after Walker performed her obligations, Washington Mutual credited the installment payments to her account. None of the documents submitted in connection with Washington Mutual’s showing state that Walker’s account was ever brought current as the result of her performance under the Repayment Plan. Thus, Washington Mutual did not carry its burden to show as a matter of law that it performed its covenant under the Repayment Plan agreement “to cure the outstanding delinquency.”
Walker contends that the trial court improperly allowed Washington Mutual’s Sirovina and Inouye to amend their declarations where the alterations eliminated triable issues of fact concerning “when and how [Washington Mutual] corrected its records to reflect Walker’s timely payment.” She argues there is no authority for the proposition that a party opposing a summary judgment motion may contradict its own prior testimony to eliminate a triable issue of fact.
DISPOSITION
The judgment is reversed. Appellant to recover costs on appeal.
We concur: CROSKEY, Acting P. J., KITCHING, J.
Sirovina declared “[i]n response to having received Walker’s first installment payment of $11,774.84, [Washington Mutual] adjusted its loan records, in February, 2003 . . . .” (Italics added.) Sirovina’s errata amended her declaration to state that Washington Mutual adjusted its records in “April, 2002, not February, 2003.” (Italics added.)
Inouye first declared that “[t]he missing payment of $11,774.84 was finally located and was posted to Walker’s loan account and Walker’s loan was reinstated for the months through October, 2001.” In her errata, filed with Washington Mutual’s reply brief in support of summary judgment, Inouye stated: “ ‘Although I was unable to locate the missing payment of $11,774.84, I nonetheless credited Walker’s loan for the payment and made the necessary arrangements to have Walker’s loan reinstated for the months through October, 2001.’ ” (Italics added.)
Washington Mutual counters that Walker waived her objection to the Sirovina errata because she never secured a ruling. (Code Civ. Proc., § 437c, subd. (d).) And, it argues, Walker has waived any objection to the Inouye errata because she never posed one in the trial court. (Code Civ. Proc., § 437c, subd. (b)(5).) We conclude, regardless of whether a party may amend its declarations to eliminate triable issues of fact or whether Walker properly raised objections to the errata, that even with the alterations, as explained, Washington Mutual failed to carry its burden in its summary judgment motion.