Opinion
B227388
10-24-2011
KHALEDA AHMED, Plaintiff and Appellant, v. WELLS FARGO BANK, N.A., et al., Defendants and Respondents.
Roy Legal Group and Raj D. Roy for Plaintiff and Appellant. Severson & Werson, Suzanne E. Hankins, Chaise R. Bivin, Jarlath Curran, Jan T. Chilton and Mark D. Lonergan for Defendant and Respondent Wells Fargo Bank, N.A. AlvardoSmith, John M. Sorich, S. Christopher Woo and Lashon Harris for Defendant and Respondent EMC Mortgage Corporation.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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. BC413621)
APPEAL from a judgment of the Superior Court for the County of Los Angeles, John Shepard Wiley Jr., Judge. Affirmed.
Roy Legal Group and Raj D. Roy for Plaintiff and Appellant.
Severson & Werson, Suzanne E. Hankins, Chaise R. Bivin, Jarlath Curran, Jan T. Chilton and Mark D. Lonergan for Defendant and Respondent Wells Fargo Bank, N.A.
AlvardoSmith, John M. Sorich, S. Christopher Woo and Lashon Harris for Defendant and Respondent EMC Mortgage Corporation.
Khaleda Ahmed appeals from the judgment entered after the trial court sustained without leave to amend Wells Fargo Bank N.A.'s and EMC Mortgage Corporation's demurrers to Ahmed's third amended complaint asserting claims including breach of contract and promissory estoppel. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
We accept as true all facts properly pleaded in Ahmed's third amended complaint to determine whether the demurrer was properly sustained. (Charnay v. Cobert (2006) 145 Cal.App.4th 170, 173, fn. 1; Casterson v. Superior Court (2002) 101 Cal.App.4th 177, 182-183 ["reviewing court accepts as true all facts properly pleaded in the complaint in order to determine whether the demurrer should be overruled"]; see Mack v. Soung (2000) 80 Cal.App.4th 966, 971 [all properly pleaded allegations deemed true, regardless of plaintiff's ability to later prove them].) Additionally, we consider information judicially noticed by the trial court at the request of Wells Fargo and EMC Mortgage in support of their demurrers to Ahmed's third amended complaint. (See Code Civ. Proc., § 430.30, subd. (a); City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1998) 68 Cal.App.4th 445, 459.)
1. The Initial Home Loan and Three Modifications; the Foreclosure Sale
In August 2007 Ahmed bought a home on Myrtle Street in Glendale. To finance the purchase, Ahmed obtained two loans from Wells Fargo: a $440,000 loan secured by a deed of trust and an $82,500 home equity line of credit secured by a second deed of trust. Soon after purchasing the home Ahmed began to experience financial difficulties and fell behind in her payments on the $440,000 loan—the only loan at issue in this case.
On January 7, 2008 a notice of default and election to sell was recorded stating Ahmed owed $11,671.25 on the loan. Ahmed alleges she contacted Wells Fargo and secured a "loan modification" permitting her to pay the past due amounts in four monthly installments and to resume regular payments beginning in July 2008.
Ahmed timely tendered the payments for March and April 2008. Wells Fargo, however, returned the April 2008 payment and instructed Ahmed to send it to EMC Mortgage, which had purchased the note and deed of trust in March 2008. According to Ahmed, EMC Mortgage would not honor the loan modification agreement she had entered with Wells Fargo and required her to agree to a more costly modification with higher monthly payments that extended through March 2009.
Ahmed was unable to make the higher payments, and a notice of trustee's sale was recorded on August 8, 2008. Failing to reach agreement with EMC Mortgage on a third loan modification plan on her own, Ahmed retained a debt refinancing organization to negotiate on her behalf. That company was able to obtain a modification requiring Ahmed to pay $2,975 per month beginning in September 2008. (The monthly payment required under the terms of the initial loan was $2,425.)
Ahmed made the September and October 2008 payments, but could not pay November 2008. On January 21, 2009 the home, which had an appraised value of $660,000 in July 2007, was sold at a trustee's sale to EMC Mortgage for $345,988.15.
2. The Pleadings
Ahmed filed her initial complaint on May 18, 2009, a first amended complaint on August 6, 2009 after EMC Mortgage had demurred and a second amended complaint on November 30, 2009 after EMC Mortgage demurred again. On April 14, 2010 the trial court sustained Wells Fargo's and EMC Mortgage's demurrers to the second amended complaint with leave to amend.
At the April 14, 2010 hearing on the demurrers to the second amended complaint, the trial court explained, based on Secrest v. Security National Mortgage Loan Trust 2002-2 (2008) 167 Cal.App.4th 544 (Secrest), Ahmed's contract claim, predicated on a breach of the oral loan modification with Wells Fargo, was barred by the statute of frauds, which requires such agreements to be in writing. In response to argument by Ahmed's counsel, the court concluded Ahmed was attempting to argue the defendants should be estopped to assert the statute of frauds and gave Ahmed leave "to try to plead your way around Secrest," which in part addressed when estoppel might be appropriate. The court, however, warned counsel, "If you think there's something you can do with this 2008 opinion from the Court of Appeal, you're going to have to do it in your next amendment because I understand that your client has sincere injury that she'd like redress for, but by the same token, these two defendants say over and over again she's had an opportunity to try to state what those injuries are and she's been failing and enough's enough."
Although the record on appeal does not include copies of any pleadings filed before the third amended complaint, there is a reporter's transcript of the April 14, 2010 hearing.
On May 5, 2010 Ahmed filed a verified third amended complaint against Wells Fargo and EMC Mortgage asserting claims for breach of contract, breach of the covenant of good faith and fair dealing, quiet title, promissory estoppel, reliance, unjust enrichment/restitution, declaratory relief and intentional and negligent infliction of emotional distress. The pleading alleged Wells Fargo and EMC Mortgage had breached the first loan modification agreement, which Ahmed admits was an oral agreement, by returning her April 2008 check and forcing her to enter into the second loan modification agreement. With respect to the newly added promissory estoppel claim, Ahmed alleged in part, "[Wells Fargo] promised to abide by the first loan modification from March 2008. When [Wells Fargo] assigned the loan to [EMC Mortgage], it is alleged that both assigner and assignee must be estopped from asserting that the first loan modification was not valid."
On August 17, 2010 the trial court granted Wells Fargo's and EMC Mortgage's demurrers to the third amended complaint without leave to amend. Citing Secrest, supra, 167 Cal.App.4th 544, the court found Ahmed's causes of action for breach of contract, breach of the covenant of good faith and fair dealing and promissory estoppel failed because the loan modification was not in writing. The court found the other causes of action were without merit for a variety of reasons, including her "reliance" claim sounded in fraud and was not pleaded with the requisite specificity and she had not tendered the balance of her obligation as required to quiet title or to demonstrate unjust enrichment.
DISCUSSION
1. Standard of Review
On appeal from an order dismissing an action after the sustaining of a demurrer, we independently review the pleading to determine whether the facts alleged state a cause of action under any possible legal theory. (McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415; Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967.) We give the complaint a reasonable interpretation, "treat[ing] the demurrer as admitting all material facts properly pleaded," but do not "assume the truth of contentions, deductions or conclusions of law." (Aubry, at p. 967; accord, Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126.) We liberally construe the pleading with a view to substantial justice between the parties. (Code Civ. Proc., § 452; Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.)
2. The Trial Court Properly Sustained the Demurrers to the Claims for Breach of Contract and Breach of the Implied Covenant of Good Faith and Fair Dealing
a. The causes of action are barred by the statute of frauds
An agreement for the sale of real property or an interest in real property must be in writing and signed by the party to be charged or by the party's agent in accordance with the statute of frauds. (Civ. Code, § 1624, subd. (a)(3) [statute of frauds]; Civ. Code, § 2922 ["mortgage can be created, renewed, or extended, only by writing, executed with the formalities required in the case of a grant of real property"].) "An agreement to modify a contract that is subject to the statute of frauds is also subject to the statute of frauds." (Secrest, supra, 167 Cal.App.4th at p. 553; see Civ. Code, § 1698, subds. (a) ["contract in writing may be modified by contract in writing"], (c) ["contract in writing may be modified by an oral agreement supported by new consideration," but statute of frauds "is required to be satisfied if the contract as modified is within its provisions"].) Thus, "an agreement by which a lender agree[s] to forbear from exercising the right of a foreclosure under a deed of trust securing an interest in real property comes within the statute of frauds." (Secrest, at p. 547.)
In Secrest, supra, 167 Cal.App.4th 544 the borrowers on a note secured by a deed of trust fell behind on their payments. The borrowers and the lender entered into a written forbearance agreement in which the lender agreed it would not take any action to foreclose as long as the borrowers complied with the conditions of the new agreement. About nine months later the borrowers again defaulted. A representative for the lender contacted the borrowers, and the parties orally agreed to the terms of a second forbearance agreement. (Id. at pp. 547-548.) The lender's representative subsequently transmitted an unsigned form of agreement to the borrowers. After the borrowers noticed errors in the document and also claimed they were "'not in arrears,'" the lender's representative told them to make corrections and send the document back, at which time the lender "'would immediately stop any collection efforts, perform a complete audit of [the] residential loan agreement . . . to determine the correct amount of arrearage, if any, and subsequently negotiate the correct amount of any reinstatement amount, if any.'" (Id. at p. 549.) The borrowers made the corrections, signed the document, sent it to the lender's representative and wire-transferred the payment the parties had agreed the borrowers would make. (Ibid.)
The lender sold the note and deed of trust without conducting a loan audit or sending a corrected forbearance agreement. The new lender subsequently filed a notice of default and election to sell under the deed of trust securing the note. (Secrest, supra, 167 Cal.App.4th at p. 550.) The borrowers brought an action to enjoin foreclosure based on the terms of the second, unsigned forbearance agreement. The trial court found only the first, signed forbearance agreement was enforceable and consequently the lender was entitled to foreclose. (Id. at p. 552.) In affirming the trial court, our colleagues in Division Three of the Fourth Appellate District, in an opinion by Justice Fybel, held the oral forbearance agreement had "attempted to modify the note and deed of trust in several ways," including substituting a new payment schedule and altering the lender's ability to exercise its foreclosure right, and thus fell within the statute of frauds. (Id. at p. 553.)
Ahmed contends Secrest is not applicable because the oral modification in that case was premised on incorrect calculations acknowledged by both parties, the first loan modification was in writing and signed by both parties and "the issue was a tender of the whole loan." These distinctions have no legal significance. The details regarding the terms to be modified are irrelevant to the fundamental principle an agreement modifying the terms of a note secured by a deed of trust must be in writing. There is simply no question Ahmed, like the plaintiff in Secrest, has alleged the oral agreement she seeks to enforce modified the terms of the promissory note by substituting a new payment plan for a period of four months. The requirement any such modification be in writing has not been met.
Ahmed's other purported distinctions of Secrest are also without merit. For example, Ahmed argues "[t]he breaching party here was the assigned lender and not Ahmed." The statute of frauds, however, requires a contract falling within its purview be signed by the party to be charged. (Civ. Code, § 1624.) Additionally, Ahmed argues the parties had intended the second forbearance agreement in Secrest would be in writing whereas in the instant case Wells Fargo and EMC Mortgage had initiated an oral loan modification and forced Ahmed to accept the terms or lose her house. This argument entirely misses the point. To be enforceable, the statute of frauds requires modification of a secured interest in real property be memorialized in writing regardless whether it initially began as an oral agreement or whether the parties intended it to be in writing.
The essence of Ahmed's argument is that in 2008 no lenders were preparing written modification agreements and she had no choice but to accept what Wells Fargo proposed, in the manner in which it was offered, or lose her home. Yet, as Secrest makes clear, sympathetic facts do not permit circumvention of the statute of frauds unless they support application of the doctrine of equitable estoppel, which we address below. (See Secrest, supra, 167 Cal.App.4th at p. 549 [borrowers had agreed with the lender on a workout plan just before it sold the note and deed of trust to a new lender that was not inclined to honor that agreement; equitable estoppel not warranted].) Additionally, because the oral agreements are not enforceable, Ahmed cannot state a claim for breach of the implied covenant of good faith and fair dealing. (See Smith v. City and County of San Francisco (1990) 225 Cal.App.3d 38, 49 ["prerequisite for any action for breach of the implied covenant of good faith and fair dealing is the existence of a contractual relationship between the parties, since the covenant is an implied term in the contract"]; Molecular Analytical Systems v. Ciphergen Biosystems, Inc. (2010) 186 Cal.App.4th 696, 712 ["[t]he convent does not exist independently of the underlying contract"].)
b. The defendants are not estopped to assert the statute of frauds
As discussed in Secrest, supra, 167 Cal.App.4th at page 555, part performance of an oral contract falling within the ambit of the statute of frauds may justify enforcement of the contract if failure to do so would cause unconscionable injury. Partial performance "'satisfies the evidentiary function of the statute of frauds by confirming that a bargain was in fact reached.'" (Ibid.) "In addition to having partially performed, the party seeking to enforce the contract must have changed position in reliance on the oral contract to such an extent that application of the statute of frauds would result in an unjust or unconscionable loss, amount in effect to a fraud." (Ibid.; cf. Monarco v. Lo Greco (1950) 35 Cal.2d 621, 623 ["The doctrine of estoppel to assert the statute of frauds has been consistently applied by the courts of this state to prevent fraud that would result from refusal to enforce oral contracts in certain circumstances. Such fraud may inhere in the unconscionable injury that would result from denying enforcement of the contract after one party has been induced by the other seriously to change his position in reliance on the contract."]; Garcia v. World Savings Bank, FSB (2010) 183 Cal.App.4th 1031, 1040, fn. 10 ["[a] party is estopped to assert the statute of frauds as a defense 'where [the] party, by words or conduct, represents that he will stand by his oral agreement, and the other party, in reliance upon that representation, changes his position, to his detriment'"].)
The third amended complaint alleged Ahmed "changed her position as a result of the first loan modification by making payments in accordance with this agreement." However, the mere payment of money due under an oral agreement subject to the statute of frauds is insufficient to establish part performance and a change of position warranting application of the estoppel doctrine. (See Secrest, supra, 167 Cal.App.4th at p. 555 ["'payment of money is not "sufficient part performance to take an oral agreement out of the statute of frauds" [citation], for the party paying money "under an invalid contract . . . has an adequate remedy at law"'"].)
3. The Trial Court Properly Sustained the Demurrers to the Claim for Promissory Estoppel
Although the trial court had only invited Ahmed to amend her complaint to allege the defendants should be estopped to assert the statute of frauds in connection with her breach of contract claim, Ahmed added to the third amended complaint a new cause of action for promissory estoppel. While estoppel to assert the statute of frauds and promissory estoppel are predicated on similar underlying equitable principles and are closely related, the two are nevertheless distinct: One is a cause of action based upon a promise that might otherwise constitute a contract but for the lack of consideration, which is enforceable notwithstanding the absence of a writing (see Garcia v. World Savings, FSB, supra, 183 Cal.App.4th at p. 1040, fn. 10); the other a doctrine permitting exception to the statute of frauds' writing requirement for a contract supported by true consideration. Despite their differences, however, Ahmed's inability to allege she detrimentally relied on Wells Fargo's oral promise modifying her loan agreement precludes the promissory estoppel cause of action as well.
Absent an express statement of leave by the trial court to add entirely new causes of action, when a demurrer is sustained with leave to amend, that leave is properly construed as permission to amend the causes of action as to which the demurrer was sustained (People ex rel. Dept. Pub. Wks. v. Clausen (1967) 248 Cal.App.2d 770, 785), to add new causes of action that respond directly to the trial court's reasons for sustaining the earlier demurrer (Patrick v. Alacer Corp. (2008) 167 Cal.App.4th 995, 1015), or to plead new legal theories based on the same operative facts alleged in the prior complaint. (See McCall v. PacifiCare of Cal., Inc., supra, 25 Cal.4th at p. 415 [issue on demurrer is whether facts alleged state a cause of action under any possible legal theory].)
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"In California, under the doctrine of promissory estoppel, 'A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. . . .' [Citations.] Promissory estoppel is 'a doctrine which employs equitable principles to satisfy the requirement that consideration must be given in exchange for the promise sought to be enforced.'" (Kajima/Ray Wilson v. Los Angeles County Metropolitan Transportation Authority (2000) 23 Cal.4th 305, 310; see Raedeke v. Gibraltar Sav. & Loan Assn. (1974) 10 Cal.3d 665, 672.)
The elements of a promissory estoppel claim are (1) a clear promise, (2) reasonable and foreseeable reliance, (3) substantial detriment and (4) damages measured by the extent of the obligation assumed and not performed. (Toscano v. Greene Music (2004) 124 Cal.App.4th 685, 692; see Aceves v. U.S. Bank, N.A. (2011) 192 Cal.App.4th 218, 225 (Aceves).) Although equitable in nature, promissory estoppel is akin to a cause of action based on contract except the consideration needed to form an enforceable contract is provided by detrimental reliance. (Toscano, at pp. 692-693; see Aceves, at pp. 230-231.) Courts therefore "have characterized promissory estoppel claims as being basically the same as contract actions, but only missing the consideration element. . . ." (US Ecology, Inc. v. State of California (2005) 129 Cal.App.4th 887, 903.) The party claiming estoppel must specifically plead all facts relied on to establish its elements. (See Smith v. City and County of San Francisco, supra, 225 Cal.App.3d at p. 48.)
If the promise to be enforced is supported by consideration, no claim for promissory estoppel can be stated. (Youngman v. Nevada Irrigation Dist. (1969) 70 Cal.2d 240, 249; Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 275.) The claim instead must be pleaded as one for breach of the bargained-for contract. (Raedeke v. Gibraltar Sav. & Loan Assn., supra, 10 Cal.3d 665, 672-673; see Garcia v. World Savings, FSB, supra, 183 Cal.App.4th at pp. 1040-1041 [promissory estoppel appropriate only where no true consideration given].)
Here, Ahmed has consistently argued the oral loan modification agreement was an enforceable contract, a claim strikingly at odds with her new cause of action for promissory estoppel. Although not discussed by the parties, however, it may well be that the oral modification agreement in which Wells Fargo promised not to foreclose and extended the time for Ahmed to cure her default in loan payments was truly gratuitous, with Ahmed's bargained-for performance consisting of no more than her preexisting duty to repay the loan. (Compare Garcia v. World Savings, FSB, supra, 183 Cal.App.4th at p. 1042 [borrowers' actions in procuring high cost, high interest loan using other property as security did not constitute consideration for lender's promise to postpone foreclosure sale] with Fontenot v. Wells Fargo Bank, N.A., supra, 198 Cal.App.4th at pp. 261, 275 [borrower's promise to make monthly payments including a substantial balloon payment constituted proper consideration for bank's promise not to foreclose]; see generally Raedeke v. Gibraltar Sav. & Loan Assn., supra, 10 Cal.3d 665, 674, fn. 3 [law of consideration not satisfied unless performance by promisee includes something that is not within the requirement of his or her preexisting duty].)
Even if she could satisfy this initial, essential element of a claim for promissory estoppel, Ahmed has nonetheless failed to allege facts, or even a conclusory allegation for that matter, that she reasonably acted in detrimental reliance on Wells Fargo's promise to allow her to cure the default under the terms of the first oral modification agreement. Contrary to Ahmed's argument, her situation is nothing like the plaintiff's in Aceves, supra, 192 Cal.App.4th 218, who filed for bankruptcy under chapter 7 of the Bankruptcy Code (11 U.S.C. §§ 701-784) after falling behind on her monthly mortgage payments. Although she had intended to convert the proceeding to a chapter 13 proceeding (11 U.S.C. §§ 1301-1330), she agreed to forgo further bankruptcy proceedings after she contacted the bank and it promised to work with her on a loan reinstatement and modification if she would do so. (Aceves, at p. 221.) The bank, however, did not negotiate a modification with the plaintiff and sold the home at a trustee's sale after moving in bankruptcy court to lift the stay of proceedings. (Id. at p. 223.)
The Aceves plaintiff filed an action against the bank for claims including promissory estoppel. The Court of Appeal reversed the trial court's order dismissing the action after sustaining the bank's demurrer without leave to amend, holding the plaintiff had stated a claim for promissory estoppel. The appellate court concluded it was both reasonable and foreseeable for the plaintiff to have relied on the bank's representations when she declined to convert her chapter 7 proceeding and did not oppose the bank's motion to lift the bankruptcy stay. (Aceves, supra, 192 Cal.App.4th at pp. 227-228 ["[b]y promising to work with Aceves to modify the loan in addition to reinstating it, U.S. Bank presented Aceves with a compelling reason to opt for negotiations with the bank instead of seeking bankruptcy relief''].)
Similarly, in Garcia v. World Savings, FSB, supra, 183 Cal.App.4th 1031 the borrowers alleged they had relied on the lender's promise to postpone the foreclosure sale while they incurred significant costs in obtaining a high interest loan secured by a different piece of real property. Division Four of this court held those acts "were sufficient to support detrimental reliance, although the actions provided no particular benefit to respondent." (Id. at p. 1041.)
Ahmed, on the other hand, alleges only that she made payments demanded to cure her default. Performance of her preexisting contractual obligation, no matter how personally difficult it may have been because of her deteriorating financial condition, is simply insufficient to constitute detrimental reliance. As a result, Ahmed cannot state a cause of action for promissory estoppel.
4. Ahmed Has Abandoned the Remaining Causes of Action in the Third Amended Complaint
Citing the general legal principle a complaint need only include a "statement of facts constituting the cause of action, in ordinary and concise language" (Code Civ. Proc., § 425.10, subd. (a)(1)), Ahmed contends in summary fashion she has alleged facts constituting each element of the causes of action for quiet title, reliance, unjust enrichment/restitution, declaratory relief and intentional and negligent infliction of emotional distress. Without any analysis of the elements of these causes of action or explanation why the factual allegations set forth cognizable claims under the applicable legal principles contrary to the trial court's findings, Ahmed has abandoned these claims. (See Landry v. Berryessa Union School Dist. (1995) 39 Cal.App.4th 691, 699-700 ["[w]hen an issue is unsupported by pertinent or cognizable legal argument it may be deemed abandoned and discussion by the reviewing court is unnecessary"]; Badie v. Bank of America (1998) 67 Cal.App.4th 779, 784-785 [when appellant raises contention "but fails to support it with reasoned argument and citations to authority, we treat the point as waived"]; Mansell v. Board of Administration (1994) 30 Cal.App.4th 539, 545546 [appellant's brief must contain a legal argument with citation of authorities on the points made; if none is furnished, the court may pass on the contention without further consideration].)
DISPOSITION
The judgment is affirmed. Wells Fargo and EMC Mortgage are to recover their costs on appeal.
PERLUSS, P. J. We concur:
WOODS, J.
ZELON, J.