Opinion
E067012
08-03-2018
JOSE H. MATA, Plaintiff and Appellant, v. WELLS FARGO BANK, N.A., Defendant and Respondent.
Law Offices of Michael Poole and Michael Poole for Plaintiff and Appellant. Anglin Flewelling Rasmussen Campbell & Trytten and Robert A. Bailey for Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super.Ct.No. CIVDS1517067) OPINION APPEAL from the Superior Court of San Bernardino County. Wilfred J. Schneider, Jr., Judge. Reversed in part, as moot, and affirmed in part. Law Offices of Michael Poole and Michael Poole for Plaintiff and Appellant. Anglin Flewelling Rasmussen Campbell & Trytten and Robert A. Bailey for Defendant and Respondent.
In 2010, Jose H. Mata defaulted on a home loan originally made by the predecessor in interest of Wells Fargo Bank, N.A. (Wells). He and Wells entered into a loan modification agreement. In 2014, however, he defaulted again.
Mata then brought this action against Wells to prevent an impending foreclosure. His central allegation is that Wells told him that the interest rate under the loan modification would be lower than under the original loan; however, this was not true — while the initial rate was indeed lower, the loan modification agreement provided for the rate to escalate over time, so that it soon exceeded the rate under the original loan.
The trial court sustained Wells' demurrer to all nine causes of Mata's causes of action and entered a judgment of dismissal. Mata appeals. He contends that the demurrer was improperly sustained with respect to all but one cause of action. (He does not challenge the dismissal with respect to his fourth cause of action, for unfair competition.)
Regarding Mata's first three causes of action, for various violations of the Homeowner Bill of Rights (Stats. 2012, ch. 86) (HBOR), we will hold that the appeal is moot because Wells has voluntarily given him all of the relief he could possibly seek. Regarding his last five causes of action, for fraud, negligent misrepresentation, breach of the implied covenant of good faith and fair dealing, breach of contract, and promissory estoppel, we will hold that the demurrer was properly sustained.
I
FACTUAL BACKGROUND
The following facts are taken form the allegations of the complaint, augmented by matters of which the trial court took judicial notice. (See part III, post.)
In 2007, Mata took out a loan for $693,500 from Wells' predecessor in interest, secured by his home in Chino. Until December 1, 2010, the interest rate was 7.200 percent. Thereafter, it would be 2.650 percent above a named index rate.
As of June 2010, the loan was in default. Wells offered to enter into an agreement to modify the loan. Wells told Mata, falsely, that under the loan modification agreement:
1. The interest rate would be less than the interest rate on the original loan.
2. The monthly payments would be $2,185.50.
3. The original note would "remain in full force."
As Wells points out, it is hard to understand how an agreement to modify a loan could leave the original loan terms in full force.
Wells also failed to disclose that:
1. The interest rate would eventually increase above the interest rate on the original loan.
2. The maturity date of the loan would be extended by 10 years.
3. Making regular monthly payments would not reduce the principal balance.
In reliance on these representations and nondisclosures, Mata signed the loan modification agreement. The agreement was in English; Wells did not give Mata a Spanish translation. It provided:
Presumably the reader is meant to conclude that (1) Mata could not read English, and (2) the fact that the loan documents were in English prevented him from learning the true terms of the loan modification agreement. However, he did not actually allege either point.
"The Principal and Interest payment(s) on the Loan will be as follows:
| "Payment Due Date | Payment | Interest Rate |
| 08/01/2010 | $2,185.50 | 2.275% |
| 08/01/2013 | $2,549.36 | 3.275% |
| 08/01/2014 | $2,933.88 | 4.275% |
| 08/01/2015 | $3,335.83 | 5.275% |
| 08/01/2016 | $3,531.06 | 5.750%" |
According to Wells, in May 2014, Mata defaulted on the loan modification agreement. As a result, on June 26, 2015, Wells initiated foreclosure proceedings by recording a notice of default.
Wells did not exercise due diligence to contact Mata beforehand to assess his financial situation or to explore options to avoid foreclosure, thus violating Civil Code former section 2923.55. It recorded a declaration stating that it had exercised due diligence to contact him, but this was false and thus violated Civil Code section 2924.17. Also, it did not consider a new loan modification, thus violating Civil Code former section 2923.6.
II
PROCEDURAL BACKGROUND
Mata filed this action against Wells in 2015. The operative (first amended) complaint asserted nine causes of action:
Barrett Daffin Frappier Treder & Weiss, LLP was also named as a defendant, but it filed a declaration of nonmonetary status. This meant that it disclaimed any involvement in the action, other than as trustee, and it agreed to be bound by any judgment. (Civ. Code, § 2924l .)
1. Failure to exercise due diligence to contact Mata to assess his financial situation and to explore options for him to avoid foreclosure, in violation of Civil Code former section 2923.55 (see now Civ. Code, § 2923.5).
2. Failure to properly consider a loan modification, in violation of Civil Code former section 2923.6 (see now Civ. Code, § 2924.11).
3. Falsely declaring that there had been compliance with Civil Code former section 2923.55, in violation of Civil Code section 2924.17.
4. Unfair competition in violation of Business and Professions Code section 17200.
5. Fraud.
6. Negligent misrepresentation.
7. Breach of the implied covenant of good faith and fair dealing.
8. Breach of contract.
9. Promissory estoppel.
Wells filed a demurrer, which the trial court sustained, ruling that:
a. The first through seventh causes of action were preempted.
b. The fourth through seventh causes of action were time-barred.
c. With regard to the eighth cause of action, the complaint failed to allege the elements of breach of contract.
d. With regard to the ninth cause of action, the complaint failed to allege the elements of promissory estoppel.
It denied leave to amend the first through seventh causes of action. However, it granted 20 days' leave to amend the eighth and ninth causes of action. Mata did not file a timely amended complaint. The trial court therefore entered a judgment of dismissal.
III
STANDARD OF REVIEW
A demurrer should be sustained when "[t]he pleading does not state facts sufficient to constitute a cause of action." (Code Civ. Proc., § 430.10, subd. (e).)
"'Our standard of review of an order sustaining a demurrer is well settled. We independently review the ruling on demurrer and determine de novo whether the complaint alleges facts sufficient to state a cause of action. [Citation.] In doing so, we "give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.] . . ." [Citation.]' [Citation.] 'We assume the truth of the properly pleaded factual allegations, facts that reasonably can be inferred from those expressly pleaded and matters of which judicial notice has been taken. [Citations.] We liberally construe the pleading with a view to substantial justice between the parties. [Citations.]' [Citation.]" (Van Audenhove v. Perry (2017) 11 Cal.App.5th 915, 918-919.)
When a demurrer is sustained, "[i]t is an abuse of discretion for the court to deny leave to amend where there is any reasonable possibility that plaintiff can state a good cause of action. [Citations.]" (Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2018) ¶ 7:129.1, p. 7(I)-58, italics omitted.) "The burden is on the plaintiff, however, to demonstrate the manner in which the complaint might be amended. [Citation.]" (Hendy v. Losse (1991) 54 Cal.3d 723, 742.)
Wells' demurrer was accompanied by a request for judicial notice. The trial court granted the request for judicial notice in its entirety. Mata did not object to the request for judicial notice below. He also does not argue in this appeal that the trial court erred by granting the request. Therefore, we, too, take judicial notice.
IV
MOOTNESS
As mentioned, Mata asserted three causes of action for violations of HBOR:
1. Failure to exercise due diligence to contact Mata to assess his financial situation and to explore options for him to avoid foreclosure, in violation of Civil Code former section 2923.55.
2. Failure to properly consider a loan modification, in violation of Civil Code former section 2923.6.
3. Falsely declaring that there had been compliance with Civil Code former section 2923.55, in violation of Civil Code section 2924.17.
The trial court ruled that these causes of action were preempted; Mata argues that this was error. In response, Wells has filed a motion to dismiss, arguing that these causes of actions are moot because, after this action was filed, it allowed Mata to apply for a new loan modification, and therefore this contention is also moot.
In support of its mootness claim, Wells has shown that, in February 2016, Mata requested a loan modification. Between February 2016 and February 2017, Wells had extensive contact with Mata (through his counsel) regarding his application. In February 2017, his application was deemed complete. In March 2017, Wells denied the application; it explained: "Based on the documentation you provided, we are unable to create an affordable mortgage payment that still meets the requirements of the [applicable loan modification] program." Mata did not appeal from the denial. Throughout this process, Wells did not take any steps toward foreclosure.
According to Wells' written denial, Mata's gross monthly income is $3,510; the outstanding principal balance is $648,571.36.
The only remedy for a violation of Civil Code sections 2923.55, 2923.6 or 2924.17 — as they stood in June 2015, when Wells recorded its notice of default — was an injunction against a foreclosure sale, which could remain in effect only until the lender cured the violation. (Civ. Code, former § 2924.12, subd. (a), Stats. 2012, ch. 86, § 16, pp. 2309-2310; Rees v. PNC Bank, N.A. (N.D. Cal. 2015) 308 F.R.D. 266, 272.) Damages were not available unless and until a foreclosure sale took place. (Civ. Code, former § 2924.12, subd. (b).) Moreover, a defendant could not be held liable for any violation of these statutes if it corrected the violation before a foreclosure sale. (Id., subd. (c).)
Wells' evidence shows that it cured the alleged violation of Civil Code former section 2923.55 by contacting Mata, assessing his financial situation, and exploring options for him to avoid foreclosure. (Id., subds. (a), (b)(2), (f).) It cured the alleged violation of Civil Code former section 2923.6 by making a written determination that he was not eligible for a loan modification, sending him notice of the denial, and giving him time to appeal. (Id., subds. (c)(1), (d), (f).) It cured the alleged violation of Civil Code section 2924.17 by complying with Civil Code former section 2923.55, so that the declaration in the notice of default stating that it had done so was no longer false. (Civ. Code, § 2924.17, subd. (a).)
Mata's only argument that the violations have not been cured is that Wells supposedly did not provide alternatives to foreclosure. Wells was required to "explore options for the borrower to avoid foreclosure" (Civ. Code, former § 2923.55, subd. (b)(2)); this would include options other than a loan modification (see Stats. 2012, ch. 86, § 1(b), p. 2298 [legislative purpose is "to ensure that borrowers who may qualify for a foreclosure alternative are considered for, and have a meaningful opportunity to obtain, available loss mitigation options."]). Wells' evidence showed, however, that it offered to consider a short sale or a deed in lieu of foreclosure, if Mata so requested. Mata has not introduced any contrary evidence.
We deem Mata to have forfeited any other such arguments. This would include any argument that Wells' original notice of default is void, so that it would have to file a new notice of default in order to foreclose.
Mata also argues that Wells' compliance presents a factual issue, which it is inappropriate to decide on a demurrer. The mootness issue, however, arises not on a demurrer, but on a motion to dismiss the appeal. In deciding a motion to dismiss on mootness grounds, it is perfectly appropriate for us to take evidence — even postjudgment evidence. (Reserve Insurance Co. v. Pisciotta (1982) 30 Cal.3d 800, 813; In re K.M. (2015) 242 Cal.App.4th 450, 456.) Indeed, it is hard to imagine how else we could ever decide whether any appeal is moot. Moreover, because Mata has not introduced any contrary evidence, there is no factual dispute to be resolved.
Finally, Mata argues that Wells is judicially estopped to rely on its compliance with HBOR, because it argued below that HBOR is preempted and therefore it was not required to comply. Judicial estoppel applies, however, only when a litigant has taken two "'totally inconsistent'" positions in successive judicial proceedings. (MW Erectors, Inc. v. Niederhauser Ornamental & Metal Works Co., Inc. (2005) 36 Cal.4th 412, 422.) It is not inconsistent for Wells to comply with HBOR, even while claiming HBOR is preempted, simply as an act of grace and/or to avoid further litigation.
We therefore conclude that this appeal, to the extent that it involves Mata's HBOR causes of action, is moot and must be dismissed.
V
STATUTE OF LIMITATIONS
Mata contends that he stated causes of action for fraud, negligent misrepresentation, and breach of the implied covenant. As part of this contention, he argues that these causes of action are not barred by the statute of limitations.
A. Allegations of the Complaint.
Mata's fraud and negligent misrepresentation causes of action alleged that Wells misrepresented or failed to disclose the actual terms of the loan modification agreement, including that:
1. The interest rate would eventually rise above the interest rate under the original loan.
2. The maturity of the loan would be extended 13 years.
3. Making regular monthly payments would not reduce the principal balance.
Mata relied on these misrepresentations by executing the loan modification agreement.
Mata's cause of action for breach of the implied covenant similarly alleged that Wells misrepresented the fact that the interest rate under the loan modification agreement would eventually rise above the interest rate of the original loan.
Mata discovered these misrepresentations when "he received a letter . . . ."
B. Grounds for the Demurrer.
Wells demurred to these causes of action on multiple grounds, including that they were barred by the statute of limitations. The trial court agreed.
C. Discussion.
The limitations period for a cause of action for fraud or negligent misrepresentation is three years. The statute runs from the plaintiff's discovery of the facts constituting the fraud or misrepresentation. (Code Civ. Proc., § 338, subd. (d); Broberg v. Guardian Life Ins. Co. of America (2009) 171 Cal.App.4th 912, 920.)
"'[I]f an action is brought more than three years after commission of the fraud, plaintiff has the burden of pleading and proving that he did not make the discovery until within three years prior to the filing of his complaint.' [Citation.] To excuse failure to discover the fraud within three years after its commission, a plaintiff also must plead 'facts showing that he was not negligent in failing to make the discovery sooner and that he had no actual or presumptive knowledge of facts sufficient to put him on inquiry.' [Citations.] To that end, a plaintiff must allege facts showing 'the time and surrounding circumstances of the discovery and what the discovery was.' [Citation.] Conclusory allegations will not withstand a demurrer. [Citation.] The discovery-related facts should be pleaded in detail to allow the court to determine whether the fraud should have been discovered sooner. [Citation.]" (Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1472.)
Here, the alleged fraud and misrepresentation occurred not later than when Mata executed the loan modification agreement. Judicial notice showed that this was June 21, 2010. He did not file this action until November 20, 2015 — five and a half years later. The complaint does not allege when or how he discovered the fraud and misrepresentation. Thus, the trial court properly sustained the demurrer.
Similarly, the limitations period for a cause of action for breach of the implied covenant in a written contract is four years. (Code Civ. Proc., § 337, subd. 1; Ladd v. Warner Bros. Entertainment, Inc. (2010) 184 Cal.App.4th 1298, 1309, fn. 7.) Ordinarily, the limitations period starts to run when the implied covenant is breached. (Romano v. Rockwell Internat., Inc. (1996) 14 Cal.4th 479, 490.) Under the discovery rule, however, accrual may be delayed until the plaintiff discovers the breach. (April Enterprises, Inc. v. KTTV (1983) 147 Cal.App.3d 805, 828-833.)
"'In order to rely on the discovery rule for delayed accrual of a cause of action, "[a] plaintiff whose complaint shows on its face that his claim would be barred without the benefit of the discovery rule must specifically plead facts to show (1) the time and manner of discovery and (2) the inability to have made earlier discovery despite reasonable diligence." [Citation.] In assessing the sufficiency of the allegations of delayed discovery, the court places the burden on the plaintiff to "show diligence"; "conclusory allegations will not withstand demurrer."' [Citation.]" (Nguyen v. Western Digital Corp. (2014) 229 Cal.App.4th 1522, 1553.) Once again, Mata failed to allege when or how he discovered the breach.
"[L]eave to amend is liberally granted after a demurrer is sustained." (Fleet v. Bank of America N.A. (2014) 229 Cal.App.4th 1403, 1414.) Mata, however, did not request leave to amend below, and he has not requested leave to amend in this appeal. A fortiori, he has not suggested what facts he could plead that would overcome the statute of limitations. Thus, leave to amend was properly denied.
VI
BREACH OF CONTRACT
Mata's breach of contract cause of action alleged that "[i]n forming the loan modification agreement," Wells promised that the monthly payments would be $2,185.50, that the interest rate would be 2.275 percent, and that the interest rate under the loan modification agreement would be less than the interest rate under the original loan.
Wells demurred on the ground that Mata did not allege that any particular provision of the loan modification agreement was breached. Mata contends that he alleged all of the elements of a cause of action for breach of contract.
The only breach Mata alleged was a breach of the loan modification agreement itself. However, he did not allege that the loan modification agreement contained a promise that the interest rate would be the same as under the original loan. Quite the contrary, he alleged that it provided for specified step increases. This was confirmed by the loan modification agreement itself, of which the trial court took judicial notice.
Rather, Mata alleged that Wells made some kind of side promise, which contradicted the terms of the loan modification agreement. However, he did not allege that this side promise was an independently enforceable contract. He also did not allege that the side promise was the true contract, the terms of which were misstated in the written loan modification agreement. (Nor does he explain how he could have alleged this without violating the parol evidence rule, Code Civ. Proc., § 1856.) And finally, he did not seek reformation or rescission of the loan modification agreement based on fraud or mistake. Hence, the demurrer to this cause of action was properly sustained.
There is no issue as to whether the trial court should have given Mata leave to amend. With respect to this cause of action, it did give him leave to amend. He simply chose not to do so.
VII
PROMISSORY ESTOPPEL
Mata's promissory estoppel cause of action alleged that Wells promised that (1) the interest rate under the loan modification agreement would be less than under the original loan and (2) the loan modification agreement was "in accordance with" the original loan. Mata relied on these promises by making payments. Accordingly, Wells was bound by these promises.
Mata alleged that he also relied by "elect[ing] not to pursue other avenues for relief from the unjust and fraudulent terms of the original loan . . . ." However, he did not allege that the original loan was unjust or fraudulent, much less why it was unjust or fraudulent. --------
The trial court sustained the demurrer on the ground that Mata "failed to allege the required elements for promissory estoppel . . . ."
Mata contends that he did allege all of the elements of a cause of action for promissory estoppel. He lists the elements of a cause of action for breach of contract; however, he never lists the elements of a cause of action for promissory estoppel. A fortiori, he does not explain how his allegations satisfied those elements. We therefore deem this argument forfeited. (Carr v. Rosien (2015) 238 Cal.App.4th 845, 856, fn. 6 [appellant forfeited contention "by failing to support it with reasoned argument and citation of authority."].)
This is not to say that, if not forfeited, it would have merit.
"[A] plaintiff cannot state a claim for promissory estoppel when the promise was given in return for proper consideration." (Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 275, disapproved on other grounds in Yvanova v. New Century Mortg. Corp. (2016) 62 Cal.4th 919, 939, fn. 13.) "'The purpose of th[e] doctrine [of promissory estoppel] is to make a promise binding, under certain circumstances, without consideration in the usual sense of something bargained for and given in exchange. If the promisee's performance was requested at the time the promisor made his promise and that performance was bargained for, the doctrine is inapplicable.' [Citation.] 'In other words, where the promisee's reliance was bargained for, the law of consideration applies; and it is only where the reliance was unbargained for that there is room for application of the doctrine of promissory estoppel.' [Citation.]" (Avidity Partners, LLC v. State of California (2013) 221 Cal.App.4th 1180, 1209.)
Here, Wells' promises — whatever they may have been — were not unconditional. Rather, they were conditional on, and in consideration of, Mata entering into a loan modification and making payments on the loan again. Hence, they do not support a cause of action for promissory estoppel. (Fontenot v. Wells Fargo Bank, N.A., supra, 198 Cal.App.4th at p. 275 ["Because Wells Fargo's promise not to foreclose . . . was given for proper consideration, in the form of plaintiff's agreement to resume making payments on the promissory note, the complaint cannot state a claim for promissory estoppel."].)
Once again (see part VI, ante), the trial court gave Mata leave to amend this cause of action, so there is no issue regarding leave to amend.
VIII
DISPOSITION
The judgment with respect to causes of action one through three is reversed as moot; the trial court is directed to dismiss these causes of action. (Paul v. Milk Depots, Inc. (1964) 62 Cal.2d 129, 134-135; Coalition for a Sustainable Future in Yucaipa v. City of Yucaipa (2011) 198 Cal.App.4th 939, 944.) The judgment with respect to causes of action four through nine is affirmed. In the interest of justice, each side shall bear its own costs on appeal.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
RAMIREZ
P. J. We concur: CODRINGTON
J. SLOUGH
J.