Justia California Court of Appeals Opinion Summaries

Articles Posted in Banking
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Prima Donna’s president, opened commercial bank accounts at Wells Fargo; he signed or agreed to be bound by several agreements, including wire transfer agreements. The commercial account agreement contained an arbitration agreement. A Prima employee was the victim of fraud and authorized wire transfers to foreign banks. Before Prima reported the fraud, $638,400 had been transferred and could not be recovered. Prima sued, alleging that Wells Fargo did not employ reasonable commercial standards of fair dealing and failed to follow the agreement's security procedures. The court ordered arbitration, stating “The fact that UCC provisions displace common law provisions and provide the law under which claims are analyzed" is unrelated to what type of fact-finder can apply that law. The arbitrator concluded that Wells Fargo was not liable for the loss. The court of appeal concluded the trial court properly ordered the matter to arbitration and confirmed the award. The court rejected arguments that the arbitration agreement was substantively unconscionable because the arbitrator would not necessarily decide the dispute under California law, because it denied Prima its right to a jury trial, or because of the limited nature of judicial review. The arbitration process allowed for discovery, an arbitrator who voluntarily recused himself after Prima expressed concern about his impartiality, a multi-day hearing, written discovery, evidentiary rulings, and a reasoned, written award that applied relevant California law, View "Prima Donna Development Corp. v. Wells Fargo Bank, N.A." on Justia Law

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Plaintiff filed suit against Pennymac and others for wrongful foreclosure, alleging that the assignment of his mortgage to Pennymac was invalid. The Court of Appeal affirmed the trial court's decision to sustain the defense demurrer because plaintiff failed to allege facts supporting his claim. In this case, plaintiff's complaint seemed to suggest that a borrower, by refusing to pay, can prevent a lender from assigning the debt. The court held that plaintiff failed to give a logical basis for this strange suggestion. Furthermore, plaintiff's remaining causes of action also failed. View "Myles v. Pennymac Loan Services, LLC" on Justia Law

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In 2012, California enacted legislation known as the California Homeowner Bill of Rights, or HBOR, which imposed specific limitations regarding the nonjudicial foreclosure of owner-occupied residential real property. The trial court granted Rosana Bustos’ ex parte application for a temporary restraining order (TRO) and order to show cause regarding preliminary injunction, which sought to prevent a trustee’s sale of her home due to several alleged violations of the HBOR related to her submission of a loan modification application. Central to Bustos’ application was a “blatant violation” of the HBOR’s prohibition against dual tracking--when a mortgage servicer continues foreclosure proceedings while reviewing a homeowner’s application for a loan modification. After the trial court denied Bustos’ request for a preliminary injunction and vacated the TRO, it awarded her $4,260 in attorney fees and costs, finding Bustos was a “prevailing borrower” under the HBOR because she obtained injunctive relief in the form of a TRO against her mortgage servicer, Wells Fargo Bank, N.A. On appeal, Wells Fargo argued the trial court erred in interpreting Civ. Code section 2924.12 as authorizing an award of attorney fees and costs to a borrower who obtains a TRO enjoining a trustee’s sale of his or her residence. Wells Fargo alternatively contended the trial court abused its discretion in awarding attorney fees and costs to Bustos under the circumstances of this case. Finding no reversible error, the Court of Appeal affirmed the trial court. View "Bustos v. Wells Fargo Bank, N.A." on Justia Law

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Plaintiff Gregory Moore contacted defendant Wells Fargo, N.A. to discuss possible assistance programs while he was unemployed. Wells Fargo recommended the forbearance plan (Plan) under the Home Affordable Unemployment Program (Unemployment Program) outlined in the United States Department of the Treasury’s Home Affordable Mortgage Program (HAMP) supplemental directive 10-04, May 11, 2010 (Directive 10-04). Wells Fargo explained the Plan would allow Moore to make reduced monthly payments for a period of time and said there was “no downside” to the Plan -- if Moore qualified for a permanent loan modification at the conclusion of the Plan, the arrears would be added to the modified loan balance and, if Moore did not qualify for a permanent loan modification, he would return to making his normal monthly payments. Moore applied for and was accepted to participate in the Plan. Moore made the Plan payments and later applied for a permanent loan modification. Three days after receiving a denial of his permanent loan modification application, Moore received a letter from Wells Fargo stating he was in default on his loan, demanding immediate payment of his normal mortgage payment and the arrears consisting principally of the difference between his normal mortgage payments and the reduced Plan payments (i.e., a balloon payment), and threatening foreclosure. Moore sued to stop the foreclosure and asserted the following causes of action: (1) declaratory relief; (2) negligence; (3) breach of the covenant of good faith and fair dealing; (4) fraud; and (5) violation of Business and Professions Code section 17200, the unfair competition law. In pretrial rulings, the trial court, among other things, adjudicated Moore’s declaratory relief cause of action in favor of Wells Fargo’s contractual interpretation permitting it to demand the balloon payment and dismissed Moore’s negligence cause of action in response to Wells Fargo’s motion for judgment on the pleadings. After Moore rested his case at trial, the trial court granted Wells Fargo’s motion for nonsuit as to Moore’s breach of the implied covenant of good faith and fair dealing cause of action. The trial court further granted Wells Fargo’s motion for judgment notwithstanding the verdict after the jury found Wells Fargo had committed fraud. The trial court also adjudicated the unfair competition law cause of action posttrial, finding in favor of Wells Fargo, and granted Wells Fargo’s motion for costs and attorney fees. The Court of Appeal reversed the trial court's rulings in favor of Wells Fargo, and the jury's verdict in favor of Moore on the intentional misrepresentation cause of action was reinstated. View "Moore v. Wells Fargo Bank, N.A." on Justia Law

Posted in: Banking, Consumer Law
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Plaintiff-borrowers Thaddeus Potocki and Kelly Davenport sued Wells Fargo Bank, N.A. and several other defendants (collectively, “Wells Fargo”) arising out of plaintiffs’ attempts to get a loan modification. The trial court sustained Wells Fargo’s demurrer to the third amended complaint without leave to amend. On appeal, plaintiffs argued: (1) a forbearance agreement obligated Wells Fargo to modify their loan; (2) the trial court erred in finding Wells Fargo owed no duty of care; (3) Wells Fargo’s denial of a loan modification was not sufficiently detailed to satisfy Civil Code section 2923.61; and (4) a claim of intentional infliction of emotional distress was sufficiently pled. The Court of Appeal determined plaintiffs’ third contention had merit, and reversed judgment of dismissal, vacated the order sustaining the demurrer insofar as it dismissed the claim for a violation of section 2923.6, and remanded for further proceedings. View "Potocki v. Wells Fargo Bank, N.A." on Justia Law

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Plaintiff filed suit against Wells Fargo in tort for negligent mortgage modification and other claims. The trial court sustained Wells Fargo's demurrer, partly because Wells Fargo did not owe plaintiff a duty in tort during contract negotiation. The Court of Appeal held that no tort duty exists during contract negotiations for mortgage modification. Therefore, the court affirmed the trial court's judgment, finding that the majority of other states are against it, and the most recent Restatement counsels against this extension because other bodies of law—breach of contract, negligent misrepresentation, promissory estoppel, fraud, and so forth—are better suited to handle contract negotiation issues. View "Sheen v. Wells Fargo Bank, N.A." on Justia Law

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The Taniguchis obtained a $510,500 home loan, secured by a deed of trust. A 2009 loan modification reduced their monthly payments and deferred until the loan's maturity approximately $116,000 of indebtedness. The modification provided that failure to make modified payments as scheduled would be default so that the modification would be void at the lender’s option. The modification left unchanged the original acceleration clauses and power of sale. The Taniguchis defaulted on the modified loan and were informed that to avoid foreclosure, they would have to pay their four missed payments and associated late charges, foreclosure fees and costs, plus all sums deferred under the modification (about $120,000 in principal, interest and charges). The Taniguchis filed suit. Restoration recorded a notice of trustee’s sale. The Taniguchis obtained a temporary restraining order. The Taniguchis alleged violations of Civil Code section 2924c by demanding excessive amounts to reinstate the loan, unfair competition, breach of contract, and breach of the covenant of good faith and fair dealing. The trial court entered judgment in favor of Restoration. The court of appeal vacated in part. When principal comes due because of a default, section 2924c allows a borrower to cure that default and reinstate the loan by paying the default amount plus fees and expenses. Section 2924c gives the Taniguchis the opportunity to cure by paying the missed modified payments and avoid the demand for immediate payment of the deferred amounts. Nothing in the loan modification suggests that the Taniguchis forfeited that opportunity; section 2924c does not indicate that a forfeiture would be enforceable. View "Taniguchi v. Restoration Homes, LLC" on Justia Law

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Walter Ward took out a secured loan in 2007 without indicating whether he signed the deed of trust (DOT) conveying his property to the lender in his individual capacity or in his capacity as sole trustee of the trust in which his property was held. That DOT was never recorded. Years later, the lender's successor, JPMorgan Chase Bank, N.A. (Chase) asked for a replacement to foreclose. Walter refused, prompting Chase to sue. The trial court sustained two general demurrers to Chase's complaint, entered a judgment of dismissal, and awarded contractual attorney fees and costs to Walter's son, David Ward, the successor trustee of the trust that held the property. The issue this case presented for the Court of Appeal's review centered on whether Chase could reframe its action by amendment to omit a fatal allegation in its original complaint. Because the Court conclude it could, notwithstanding the sham pleading doctrine, the court should have granted leave to amend. Accordingly, we reverse the judgment and the postjudgment order and direct the court to enter a new order sustaining the general demurrers with leave to amend. View "JPMorgan Chase Bank, N.A. v. Ward" on Justia Law

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The City brought an action against homeowners and their mortgage lender, SunTrust, and sought the appointment of a receiver to undertake the remediation of a public nuisance created by the homeowners on their residential property. Determining that the appeal was not moot, the Court of Appeal held that the trial court did not abuse its discretion in authorizing a super-priority lien to secure the loan taken by the receiver to fund remediation of the homeowners' property. In this case, because neither the homeowners nor SunTrust was willing to fund the costly remediation and the property did not produce any income, the receiver had to borrow money in order to proceed with the remediation. Because no lender would loan money to the receiver unless the loan was secured with a super-priority lien on the property, the only way to effect the remediation was to authorize the receiver's request to issue such a receiver's certificate. The court held that SunTrust's contention that it should remain the senior lienholder—and benefit from the increased property value provided by the remediation while bearing none of the cost—was simply untenable. View "City of Sierra Madre v. SunTrust Mortgage" on Justia Law

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Plaintiffs David and Hedda Schmidt appeal from a judgment entered in favor of defendants Citibank, N.A., as Trustee for Structured Asset Mortgage Investments II Trust 2007-AR3 Mortgage Pass Through Certificates Series 2007-AR3, and Select Portfolio Servicing, Inc. (defendants). In January 2007, the Schmidts obtained a $1,820,000 loan, secured by a residence at 2415 Rue Denise in La Jolla, California (the Property). The deed of trust was assigned to Citibank, N.A., as Trustee for Structured Asset Mortgage Investments II Trust 2007-AR3 Mortgage Pass Through Certificates Series 2007-AR3. The Schmidts defaulted on the loan and entered into a loan modification agreement in February 2013 with their loan servicer at the time, JPMorgan Chase Bank. Within approximately seven months, the Schmidts defaulted on the loan modification agreement. The Schmidts would apply for and be denied loan modification every year from 2013 to 2017. They sued defendants, alleging violations of the Homeowners' Bill of Rights and Business and Professions Code section 17200, seeking to prevent the completion of a trustee's sale of their residence. The defendants moved for summary judgment and presented evidence of extensive and numerous telephone calls between the Schmidts and Select Portfolio Servicing, Inc., the loan servicer, during which the Schmidts' financial situation was discussed, as were possible options to avoid foreclosure. The trial court granted the defendants' motion for summary judgment and entered judgment in their favor. On appeal, the Schmidts contended summary judgment should not have been granted because there remained triable issues of fact to be determined. The Court of Appeal disagreed and affirmed the judgment. View "Schmidt v. Citibank, N.A." on Justia Law