Opinion
B301170
02-19-2021
TODD JOHNSON, Plaintiff and Appellant, v. HSBC BANK, USA, et al., Defendants and Respondents.
Law Office of Kaveh Keshmiri and Kaveh Keshmiri for Plaintiff and Appellant. Chuck & Tsoong, Stephen C. Chuck and 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NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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. BC706462) APPEAL from a judgment of the Superior Court of Los Angeles County, Susan Bryant-Deason, Judge. Affirmed. Law Office of Kaveh Keshmiri and Kaveh Keshmiri for Plaintiff and Appellant. Chuck & Tsoong, Stephen C. Chuck and Victoria J. Tsoong for Defendants and Respondents.
____________________
Plaintiff and appellant Todd Johnson sued HSBC Bank, USA (HSBC) and Select Portfolio Servicing, Inc. (SPS) (collectively defendants) for violation of Civil Code section 2923.5, wrongful foreclosure, and intentional infliction of emotional distress (IIED), following the loss of a residential property (the Property) in a foreclosure sale. The trial court granted summary judgment in favor of defendants.
Subsequent undesignated statutory citations are to the Civil Code.
Johnson argues the trial court's ruling on his section 2923.5 cause of action was erroneous because defendants failed to explore foreclosure alternatives prior to initiating foreclosure. Johnson challenges dismissal of his wrongful foreclosure and IIED causes of action, arguing the trial court erroneously found the statute of limitations on both causes of action had expired.
We affirm. The section 2923.5 cause of action was rightly dismissed because Johnson admitted he was contacted by SPS prior to foreclosure to explore foreclosure alternatives. Moreover, section 2923.5 provides no remedy once the property at issue has been sold. The wrongful foreclosure cause of action was correctly dismissed because the statute of limitations expired seven years prior to the filing of the action. The IIED claim was properly dismissed because Johnson failed to introduce evidence that he suffered severe emotional distress.
FACTUAL AND PROCEDURAL BACKGROUND
The following factual summary is drawn from the allegations in Johnson's verified third amended complaint (TAC), the complaint operative on this appeal, as well as admissions made by Johnson during his deposition.
A. Prior Loans Encumbering the Property
Johnson testified during his deposition that at some point in 2001 the Property was subject to a tax lien sale due to delinquent property taxes. Johnson succeeded in forestalling the sale with the help of a $269,754 loan from Household Finance Corporation (the 2001 HFC Loan). To obtain the 2001 HFC Loan, Johnson enlisted a natural person named "Evy E. Harris," who functioned as a "cosigner."
In 2004, Johnson recorded a grant deed reflecting a transfer of title to Harris. Harris thereafter obtained a $355,500 loan from New Century Mortgage Corporation, encumbering the Property still further.
In June 2005, Harris recorded a grant deed reflecting a transfer of title back to Johnson. Johnson quickly obtained yet another loan secured against the Property, this time in the amount of $400,000, also from New Century Mortgage (2005 NCM Loan). About six months later, Johnson secured yet another loan in the amount of $22,296 from American General Financial Services. A few months after that, Johnson secured yet another loan in the amount of $50,000 from the Greenberg Family Trust (2006 Family Trust Loan).
B. The Subject Loan
Johnson secured the loan at the center of this lawsuit in May 2006 from New Century Mortgage in the amount of $503,200 (Subject Loan). The Subject Loan consists of an adjustable rate balloon note secured by a deed of trust. It contains a power of sale clause which may be invoked by the lender in the event of default. The corresponding deed of trust was recorded on May 15, 2006. The Subject Loan refinanced and discharged the 2005 NCM Loan and the 2006 Family Trust Loan. Johnson testified during his deposition that he recognized his signature on this deed of trust and the Subject Loan documents.
A power of sale clause " 'empowers the beneficiary-creditor to foreclosure on the real property security if the trustor-debtor fails to pay back the debt owed under the promissory note.' [Citation.]" (Orcilla v. Big Sur, Inc. (2016) 244 Cal.App.4th 982, 995.)
Despite this testimony, he nonetheless claims the loan documentation was forged, as explained, post.
Johnson admits he stopped making payments on the Subject Loan in 2007. New Century Mortgage recorded a notice of default and its intention to sell the Property on May 14, 2008 (2008 Notice of Default). This notice references the Subject Loan, and explains a default has been recorded for "failure to pay" amounts due on the Subject Loan beginning with the November 11, 2007, monthly payment. This notice indicates that the amount in arrears was $26,843.97 as of May 13, 2008, "and will increase until your account becomes current." The notice also invites Johnson to contact Countrywide Home Loans, Inc. at the address listed on the notice "[t]o find out the amount you must pay, or to arrange for payment to stop the foreclosure . . . ."
C. Subsequent History of the Subject Loan
Following Johnson's default, the Subject Loan was sold into the secondary market for distressed mortgage debt. (See, e.g., Sheen v. Wells Fargo Bank, N.A. (2019) 38 Cal.App.5th 346, 349, review granted Nov. 13, 2019, S258019.) In 2010, the Subject Loan's beneficial interest was sold to defendant HSBC Bank, N.A., and the servicing rights were sold to Reconstruct Company. The Subject Loan's servicing rights were thereafter sold to defendant SPS.
In 2011, Johnson filed two petitions for bankruptcy protection. In June 2011, Johnson filed a Chapter 13 petition. This petition was dismissed the following month. In August 2011, Johnson filed another Chapter 13 petition. This petition also was dismissed. Johnson listed the Subject Loan as an encumbrance on the property in a schedule attached to both petitions.
D. Defendants Foreclose on the Property
Another notice of default was recorded on April 22, 2014. This notice reflected that National Default Servicing Corporation had been substituted as trustee under the deed of trust securing the Subject Loan (2014 Notice of Default), and indicated the amount in arrears was $360,635.92. The 2014 Notice of Default attached a declaration pursuant to section 2923.5 that the mortgagee or authorized agent "ha[d] either contacted the borrower or tried with due diligence to contact the borrower as required" by the statute.
A notice of trustee's sale relative to the Property and Subject Loan was recorded on January 4, 2017.
Johnson stalled foreclosure proceedings again by filing yet another bankruptcy petition on January 31, 2017, this time under Chapter 7. As in each of Johnson's prior bankruptcy petitions, Johnson listed the Subject Loan as an encumbrance on the Property. Johnson's Chapter 7 bankruptcy was discharged several months later in May 2017.
On August 10, 2018, the Property was sold at a foreclosure sale. The recorded document evincing the sale indicates that the unpaid amount on the Subject Loan then stood at $1,033,956.71.
E. Trial Court Proceedings
Johnson filed suit against HSBC and SPS on May 18, 2018. Johnson's verified TAC alleges causes of action for (1) violation of section 2923.5 due to a failure to discuss foreclosure prevention options prior to initiating foreclosure, (2) wrongful foreclosure, and (3) IIED. The gist of Johnson's lawsuit is that the Subject Loan was fraudulently obtained by use of forged loan application documents.
The trial court granted summary judgment on all causes of action. The court dismissed the section 2923.5 cause of action because no triable issue of material fact existed as to whether defendants contacted Johnson to discuss foreclosure alternatives prior to initiating foreclosure. The trial court dismissed the wrongful foreclosure claim as time-barred. The trial court dismissed the IIED claim because Johnson did not effectively dispute defendants' statement of undisputed material facts wherein defendants assert Johnson suffered no emotional distress.
Johnson timely appealed.
DISCUSSION
A. Standard of Review
"We review the ruling on a motion for summary judgment de novo, applying the same standard as the trial court." (Manibog v. MediaOne of Los Angeles, Inc. (2000) 81 Cal.App.4th 1366, 1369.) "Summary judgment is appropriate only 'where no triable issue of material fact exists and the moving party is entitled to judgment as a matter of law.' " (Regents of University of California v. Superior Court (2018) 4 Cal.5th 607, 618, quoting Merrill v. Navegar, Inc. (2001) 26 Cal.4th 465, 476.) We view the evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in its favor. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.)
B. Defendants Complied with Section 2923.5
Section 2923.5, also known as the Perata Mortgage Relief Act, "requires that, before a notice of default may be filed, the lender must contact the borrower to assess the borrower's financial situation and explore options to prevent foreclosure." (Hamilton v. Greenwich Investors XXVI, LLC (2011) 195 Cal.App.4th 1602, 1615, fn. omitted; Mabry v. Superior Court (2010) 185 Cal.App.4th 208, 214.)
Johnson's TAC alleges defendants failed to comply with section 2923.5 because they did not contact him to assess his "financial ability to refinance." This assertion is contradicted by the record.
On January 29, 2013, SPS sent a letter to Johnson, wherein they advised Johnson of the following: "The mortgage loan on your property is in default as a result of your failure to make payments . . . . We have previously sent you letters and communications regarding this default in an attempt to resolve this matter. This letter provides information about the default and what rights you have to cure the default. [SPS] services your mortgage loan . . . . The [n]oteholder on your [l]oan is [HSBC]." The letter further informed Johnson he owed $235,191.75 on the Subject Loan.
Next, on April 2, 2013, SPS sent a letter to Johnson wherein it indicated it had been contacted by the federal Consumer Financial Protection Bureau (CFPB) in response to a complaint filed by Johnson, in which he claimed the Subject Loan was fraudulent. This letter indicated: "[CFPB] have advised [SPS] that on several occasions you disputed the validity of this debt, and in response to your dispute [CFPB] offered you the enclosed responses . . . . In each response [CFPB] advised you that the debt is valid and is evidenced by a [n]ote dated May 1, 2006, in the principal amount of $503,200.00, executed by you, in favor of New Century Mortgage Corporation, a copy of which they enclosed."
On January 13, 2014, SPS sent a letter to Johnson, wherein they advised Johnson of the following: "There are several options available to help resolve the default and avoid foreclosure. [SPS] want[s] to understand your situation and resolve this matter. It is important you call our office as soon as possible, so we may assist you in bringing your account current. [SPS] does not require prior documentation to review eligibility for loss mitigation options and can evaluate your situation over the telephone. If you prefer, our website, www.spservicing.com, has a link to help explain all available resolution options. You may also submit your financial information via our website."
Finally, in defendants' separate statement of undisputed facts in support of their motion for summary judgment, they submitted a declaration by a document control officer for SPS, stating that SPS contacted Johnson 19 times by telephone to discuss the delinquent mortgage and explore options to avoid foreclosure. The trial court held Johnson did not effectively dispute this fact because, among other reasons, he admitted during his deposition that he was contacted by SPS by telephone. The deposition reflects the following exchange:
"Q So, do you recall ever being contacted by [SPS] to talk about options to avoid foreclosure?
"A Yes. [¶] . . .
"Q Basically I was just asking if you ever asked—told [SPS] to stop calling you about the loan?
"A No. Like I said, I would bring in and emphasize the [problems with the 2001 HFC Loan]."
Based on Johnson's admission, the trial court rightly held there was no triable issue of fact as to whether defendants contacted Johnson prior to initiating foreclosure.
Johnson also argues defendants failed to comply with certain section 2923.5 requirements by failing to (1) provide him with a single point of contact, and (2) advise him of his right to have a meeting within 14 days.
These arguments will not aid Johnson because the remedies for a lender's noncompliance with section 2923.5 are extremely limited. "[Section 2923.5] does not provide for damages, or for setting aside a foreclosure sale, nor could it do so without running afoul of federal law, that is, the Home Owners' Loan Act [citation], and implementing regulations [citation]. [Citations.]" (Stebley v. Litton Loan Servicing, LLP (2011) 202 Cal.App.4th 522, 526.) Because the Property has already been sold, section 2923.5's only remedy, a single postponement of the impending foreclosure sale, will not aid Johnson. (See Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 77, italics added ["The only remedy afforded by section 2923.5 is, however, a one-time postponement of the foreclosure sale before it happens"], citing Mabry v. Superior Court, supra, 185 Cal.App.4th at pp. 214, 225, 235.)
C. Johnson's Wrongful Foreclosure Claim Is Time-barred
Wrongful foreclosure claims are subject to a three-year statute of limitations. (Code Civ. Proc., § 338, subd. (d).) "However, such action is not deemed accrued 'until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.' ([Id.], § 338, subd. (d).)" (Kline v. Turner (2001) 87 Cal.App.4th 1369, 1373-1374.)
"The courts interpret discovery in this context to mean not when the plaintiff became aware of the specific wrong alleged, but when the plaintiff suspected or should have suspected that an injury was caused by wrongdoing. The statute of limitations begins to run when the plaintiff has information which would put a reasonable person on inquiry." (Kline v. Turner, supra, 87 Cal.App.4th at p. 1374, italics added.)
"Simply put, in order to employ the discovery rule to delay accrual of a cause of action, a potential plaintiff who suspects that an injury has been wrongfully caused must conduct a reasonable investigation of all potential causes of that injury. If such an investigation would have disclosed a factual basis for a cause of action, the statute of limitations begins to run on that cause of action when the investigation would have brought such information to light." (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 808-809.) "So long as a suspicion exists, it is clear that the plaintiff must go find the facts; she cannot wait for the facts to find her." (Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1111.)
" 'The resolution of a statute of limitations defense is typically a factual question for the trier of fact. However, summary judgment is proper if the court can draw only one legitimate inference from uncontradicted evidence about the limitations issue.' [Citations.]" (Choi v. Sagemark Consulting (2017) 18 Cal.App.5th 308, 323-324; see Fox v. Ethicon Endo-Surgery, Inc., supra, 35 Cal.4th at p. 810 [noting that prior cases properly had resolved a statute of limitations defense on summary judgment].)
Johnson's opening brief claims he "did not discover the fraudulent loans that [defendants] were attempting to foreclose on until 2016." His reply brief similarly asserts he "never ratified the fraudulent loan because he did not discover it, and had no reason to discover it until the fraudulent loan origination proof was discovered in 2016."
These assertions are premised on Johnson's allegation that a now defunct mortgage brokerage firm, Haven Home Loans, Inc., which he used to obtain the initial 2001 HFC loan, prepared false documents with forged signatures to process the Subject Loan without Johnson's knowledge or consent. He alleges he was unaware of the fraud until he received an order in 2016 issued in an unrelated federal case involving New Century Mortgage, which gave him access to the original loan documentation.
Johnson fails to show there is a dispute of material fact to support the application of the delayed discovery rule. The verified TAC states the following: "[Johnson] simply did not know why he was facing foreclosures, from 2008 through 2016, since he never obtained the loan application material or details related to the 2006 loan with Haven Home Loans and New Century [the Subject Loan]. Since that time, [Johnson] has been facing foreclosures due to the predatory loan balloon payments that was executed without his knowledge of [sic] consent."
Johnson apparently is conflating actual notice premised on his review of the loan documentation in 2016, with inquiry notice. Johnson admits he was aware of the foreclosure proceedings that commenced in 2008. He should have suspected something was amiss with his home financing in May 2008 when he was placed on notice by the 2008 Notice of Default, which clearly identified the Subject Loan executed in 2006 as the basis for the default. That notice also referenced the failure to pay the November 1, 2007, installment payment on the Subject Loan.
Indeed, Johnson acknowledges that he failed to make the November 2007 installment payment. Johnson's declaration attached to his separate statement of undisputed material facts, states: "[Johnson] made his monthly mortgage payments each month until November 2007. . . . Around that time the mortgage suddenly ballooned in payments from $1,900.00 to over $3,000.00. Since [Johnson] was not aware of the [Subject Loan], [he] believed the balloon payments were related to the loan from [the 2001 HFC Loan]. [Johnson] called [his] servicer at the time, who was shocked at the mortgage payments demanded of [Johnson], and who informed [Johnson] to STOP making any further payments until they processed it. However, instead of assistance, [Johnson] was facing default and foreclosure notices from New Century's 2006 deed of trust. Therefore, to protect [his] Property, and without a clue as to how the payments were escalating, [Johnson] took emergency measures and filed multiple bankruptcies to save [his] home. At the time CountryWide was the servicer of the [Subject Loan]."
Upon receipt of the 2008 Notice of Default, which referenced the Subject Loan and clearly identified CountryWide as the entity to be contacted in order to address the default, a reasonable person would have inquired further with CountryWide as to why their mortgage payments suddenly jumped from $1,900 to $3,000, when that person allegedly did not agree to a mortgage modification. Johnson does not demonstrate what reasonable efforts he undertook in the ensuing years to follow through on the initial conversation with the servicer, or what reasonable efforts he undertook to further investigate the basis for the 2008 Notice of Default. Nor does he demonstrate that reasonable efforts would not have led to the discovery of the alleged fraud. Instead of educating himself about the basis for the 2008 Notice of Default, Johnson continued to forego making mortgage payments, filed multiple bankruptcies, and only filed suit 10 years later in May 2018. No reasonable person would believe it was sufficient to rely on a single conversation with the loan servicer, all the while failing to make mortgage payments for 10 years.
The 2008 Notice of Default notified Johnson that as of May 13, 2008, he was subject to default for failing to make payments on the Subject Loan, which gave him reason to suspect something was amiss with the terms of the loan. This, in turn, placed responsibility on him to conduct a reasonable investigation of the terms of the Subject Loan and the reasons for the increase in his loan payments. The undisputed facts establish as a matter of law that Johnson was on inquiry notice of the basis for his foreclosure cause of action in May 2008, and the statute of limitations began to run at that time. The trial court did not err in granting defendants' motion for summary judgment on the ground the claim was barred by the three-year statute of limitations, which expired long before he filed his complaint in May 2018.
D. There Is No Triable Issue of Material Fact as to Whether Johnson Suffered Extreme Emotional Distress
" ' "[T]o state a cause of action for intentional infliction of emotional distress a plaintiff must show: (1) outrageous conduct by the defendant; (2) the defendant's intention of causing or reckless disregard of the probability of causing emotional distress; (3) the plaintiff's suffering severe or extreme emotional distress; and (4) actual and proximate causation of the emotional distress by the defendant's outrageous conduct." ' [Citations.] ' "Conduct, to be ' "outrageous" ' must be so extreme as to exceed all bounds of that usually tolerated in a civilized society." ' [Citation.]" (Vasquez v. Franklin Management Real Estate Fund, Inc. (2013) 222 Cal.App.4th 819, 832.)
Johnson's TAC summarily alleges: "As a direct and proximate result of these defendants actions as alleged herein, including [d]efendants negligence, [Johnson] has suffered severe emotional distress in an amount to be determined at trial . . . ."
During discovery, defendants requested documents pertaining to Johnson's visits to medical professionals in the last 10 years. Initially, Johnson stated he had no responsive documents in his possession. He later supplemented his response with an "Exhibit Q" to his separate statement.
We have reviewed Exhibit Q, and it appears to be a medical record of an office visit to Kaiser Permanente on September 26, 2017. The chief complaint listed in the report is "dysesthesias and feet pain."
Johnson's briefing on appeal claims this document establishes he "sought medical care and treatment at Kaiser Permanente, requiring prescriptions for the stress, and physical anxiety and imbalance he was experiencing at the time." But this report says nothing about "stress" or "anxiety," and is, instead, exclusively focused on the treatment of Johnson's foot pain.
Johnson also claims paragraph 12 of his declaration submitted in opposition to defendants' motion for summary judgment is evidence of severe emotional distress. We have quoted paragraph 12 in full, ante. (See Discussion, section C.) Paragraph 12 does not aid Johnson, as it says nothing about him suffering severe emotional distress.
Johnson's briefing points to no other evidence that he has suffered severe emotional distress as a proximate result of defendants' alleged conduct. The trial court therefore did not err in granting summary judgment on Johnson's IIED claim.
DISPOSITION
The judgment is affirmed. Defendants shall recover their costs on appeal.
NOT TO BE PUBLISHED
Judge of the San Luis Obispo County Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
ROTHSCHILD, P. J.
BENDIX, J.