Justia California Court of Appeals Opinion Summaries

Articles Posted in Banking

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In 2004, U.S. Bank made a business loan to B2B, guaranteed by B2B’s principals, the Yousufs, and secured by a second deed of trust on the Yousufs's property. In 2011, U.S. Bank assigned the note and deed of trust to SMS. SMS, B2B and the Yousufs later executed a “Forbearance Agreement,” reciting that the loan was in default and agreeing that SMS would not exercise its rights as long as B2B made payments according to the agreement’s schedule. Months later, B2B failed to make the required payments. In 2014, SMS was preparing to initiate foreclosure when it learned that in 2007, without the knowledge of U.S. Bank, Cornerstone Title had, under Civil Code 2941(b)(3), recorded a release of the obligation secured by the deed of trust. SMS alleges that Cornerstone had no authority to do so, and that contrary to the release’s language, the secured obligation had not been satisfied or discharged. The court of appeal reversed dismissal of SMS’s suit against Cornerstone. Section 2941(b)(6) imposes broad liability on any title insurance company that issues and records a release under subdivision (b)(3). SMS, as the holder of an obligation, has the right to prove damages against Cornerstone, as a title company that recorded a release of that obligation. That SMS acquired the obligation from U.S. Bank is irrelevant. View "SMS Financial XXIII, LLC v. Cornerstone Tile Co." on Justia Law

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Sparrow obtained two loans from Countrywide, each secured by a deed of trust on Hercules, California property: a residential mortgage of $205,080 and a home equity line of credit (HELOC) of $15,000. Both deeds of trust were recorded on December 16, 2003, with the Contra Costa County Recorder’s Office; the HELOC deed as instrument 0603657 and the mortgage deed of trust as 0603058. The HELOC was assigned to the Bank and the mortgage was assigned to Nationstar. Following Sparrow’s default on the HELOC, the trustee conducted a nonjudicial sale of the property and received $105,000. After payment to the Bank and of the costs of the sale, a surplus of $73,085.50 remained, which was claimed by Sparrow, the Owners’ Association, and Nationstar. The trustee deposited the funds with the court. The court of appeal affirmed that Nationstar, as a senior lienholder, was not entitled to any of the proceeds of the sale under Civil Code section 2924k. Absent evidence of timing that was determinative, the trial court reasonably relied on the apparent intent of the parties to determine the priority of the two liens. Given that Countrywide was the lender on both loans, the reasonable expectation is that it would secure the larger mortgage loan in the primary position. View "MTC Financial, Inc. v. Nationstar Mortgage" on Justia Law

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Sparrow obtained two loans from Countrywide, each secured by a deed of trust on Hercules, California property: a residential mortgage of $205,080 and a home equity line of credit (HELOC) of $15,000. Both deeds of trust were recorded on December 16, 2003, with the Contra Costa County Recorder’s Office; the HELOC deed as instrument 0603657 and the mortgage deed of trust as 0603058. The HELOC was assigned to the Bank and the mortgage was assigned to Nationstar. Following Sparrow’s default on the HELOC, the trustee conducted a nonjudicial sale of the property and received $105,000. After payment to the Bank and of the costs of the sale, a surplus of $73,085.50 remained, which was claimed by Sparrow, the Owners’ Association, and Nationstar. The trustee deposited the funds with the court. The court of appeal affirmed that Nationstar, as a senior lienholder, was not entitled to any of the proceeds of the sale under Civil Code section 2924k. Absent evidence of timing that was determinative, the trial court reasonably relied on the apparent intent of the parties to determine the priority of the two liens. Given that Countrywide was the lender on both loans, the reasonable expectation is that it would secure the larger mortgage loan in the primary position. View "MTC Financial, Inc. v. Nationstar Mortgage" on Justia Law

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Fong, born in China in 1931, moved to San Francisco as a young man and became a real estate investor. Fong had a banking relationship with the Bank, where he had more than $3.5 million dollars on deposit. Loans involving the Bank, Fong, and UTGI, a California corporation formed by young investors who were family friends of Fong, whom Fong was assisting in establishing a real estate investment business, were not timely paid. The Bank liquidated assets Fong had pledged as collateral. In a suit claiming conversion and financial abuse of an elder under Welfare and Institutions Code section 15610.30, Fong alleged that he did not understand certain documents and that documents were forged. The trial court granted the Bank summary judgment and determined that as the “prevailing party” the Bank was “entitled to its reasonable attorneys’ fees and costs,” of $202,069.75 and $6,290.05. The court of appeal reversed finding a triable issue of material fact regarding the genuineness of Fong’s signature on the documents authorizing repayment of a loan with respect to one of Fong’s conversion claims. View "Fong v. East West Bank" on Justia Law

Posted in: Banking

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The Chois consulted in 2003 with defendants, who advised the Chois that an IRC 412(i) Plan retirement account would provide tax advantages, asset protection, and steady income. It required several steps including the purchase of “whole life” insurance for eventual exchange for American General Universal Life “Platinum” policies. The initial purchase was $1,275,000; a second purchase cost $439,000. The policies comprised 70-75 percent of the Plan portfolio. The IRS audited the Chois in 2006. Defendants changed their advice. Plaintiffs sued, alleging cash losses attributable to loss in value and that they were required to pay $440,000 in back taxes and interest, plus $60,000 in penalties, and faced future payments to the Franchise Tax Board of California and anticipated IRS penalties of $600,000. Defendants cross-complained for indemnity and comparative fault against American General. The trial court found the claims time-barred. The court of appeal affirmed, upholding a determination that the limitations period began to run in September 2007, when plaintiffs were “on notice” that the IRS would impose penalties, not in 2010 when penalties were assessed; the court declining to consider any tolling effect created by the ongoing fiduciary relationship; and application of the 2007 “notice” date as a bar to all claims. View "Choi v. Sagemark Consulting" on Justia Law

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Property owners who purchased through a foreclosure sale sued the bank that sold the house, alleging that they were mislead the bank’s deed of trust was the first deed of trust, when another remained on the property, and was not extinguished by the foreclosure sale. Wells Fargo assigned any claim against the title insurer it had to David and Lina Hovannisian (the property owners), and the Hovannisians sued First American Title Insurance Company, alleging breach of contract, negligent misrepresentation and breach of the implied covenant of good faith and fair dealing. First American moved for summary judgment, arguing its title insurance coverage had terminated, and no benefits were due. The motion was granted, and the Hovannisians appealed, arguing First American failed to establish that coverage did not continue under the title policy or there were no benefits due under the policy. They also contended triable issues of fact existed regarding their bad faith claim. The Court of Appeal affirmed, finding First American showed, based on the facts Wells Fargo and the Hovannisians presented before and after the underlying action was filed, that there was no potential for coverage under the policy. The Hovannisians did not learn about the first deed of trust until after they purchased the property at the foreclosure sale without warranty. Thus, the only potential claim they had against Wells Fargo was for the alleged misrepresentations for which there was no liability or loss under the policy. View "Hovannisian v. First American Title Ins. Co." on Justia Law

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In 2005, Nicholas and Mary Conroy refinanced their home with a mortgage loan secured by a deed of trust on the property. Five years later, the Conroys stopped making payments and defaulted on their loan. In an effort to avoid foreclosure, the Conroys filed suit against defendants Wells Fargo Bank, N.A., successor by merger to Wells Fargo Home Mortgage, Inc.; Fidelity National Title Insurance Company aka Default Resolution Network, LLC; and HSBC Bank USA, N.A. as trustee for Merrill Lynch Mortgage Backed Securities Trust, Series 2007-2 (Wells Fargo). The trial court sustained Wells Fargo’s demurrer without leave to amend and entered a judgment of dismissal. On appeal, the Conroys contended the trial court erroneously dismissed their claims. After review, the Court of Appeal found the Conroys’ operative complaint did not state valid causes of action for intentional or negligent misrepresentation because they did not properly plead actual reliance or damages proximately caused by Wells Fargo. The trial court properly determined the Conroys could not assert a tort claim for negligence arising out of a contract with Well Fargo. For lack of detrimental reliance on any of Wells Fargo’s alleged promises, the Conroys did not set forth a viable cause of action for promissory estoppel even under a liberal construction of the operative complaint. Because Wells Fargo considered and rejected a loan modification for the Conroys before that date, section 2923.6 does not apply to them. The plain language of section 2923.7 requires a borrower to expressly request a single point of contact with the loan servicer. The Conroys’ operative complaint did not allege they ever requested a single point of contact, and the Conroys did not state they could amend their cause of action to allege they actually requested one. The trial court properly dismissed the Conroys’ Unfair Competition Law claim because it was merely derivative of other causes of action that were properly dismissed. View "Conroy v. Wells Fargo Bank" on Justia Law

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A trustee's acts in recording a notice of default, a notice of sale, and a trustee's deed upon sale in the course of a nonjudicial foreclosure are privileged under Civil Code section 47. The Court of Appeal held that plaintiff did not state a cause of action for slander of title based on the recording of those documents. Therefore, the court affirmed the trial court's order sustaining a demurrer to plaintiff's slander of title claim without leave to amend. View "Schep v. Capital One" on Justia Law

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From 1999-2010, Wilcox made loans to Hardwick. In 2013, Hardwick filed suit to recover usurious interest and prevent Wilcox from foreclosing on the property securing his loans. Wilcox countersued for breach of contract and judicial foreclosure. The trial court entered judgment in favor of Hardwick, finding that usurious interest payments made over the course of the relationship offset the principal debt and that Hardwick could recover $227,235.83 in interest payments he made during the two years before the filing of the lawsuit. Under California law, when a loan is usurious, the creditor is entitled to repayment of the principal sum only. He is entitled to no interest whatsoever. The court of appeal affirmed, rejecting Wilcox’s arguments that, in a forbearance agreement, Hardwick waived his usury claim with respect to any loan payment he made before April 2012 and that the statute of limitations barred Hardwick’s claim with respect to any loan that was paid off more than two years before the lawsuit was filed.The court reasoned that the payments made before the two-year limitations period were applied to offset principal, so only the later payments were subject to recovery. View "Hardwick v. Wilcox" on Justia Law

Posted in: Banking, Business Law

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When defendant HSBC Bank USA, N.A. (HSBC) notified plaintiff Stanley P. Berman in writing that HSBC was denying his application for a loan modification, HSBC told him he had 15 days to appeal the denial. Under the law, however, Berman actually had 30 days to appeal. Berman brought this action for injunctive relief under Civil Code section 2924.12 on the theory that “the denial letter . . . [wa]s a material violation of sub[division] (d) [of section 2923.6] in that [the letter] only provide[d] fifteen days for appeal.” The trial court sustained HSBC’s demurrer to Berman’s complaint without leave to amend based on the conclusion that Berman had not alleged a violation of section 2923.6. On Berman’s appeal, the Court of Appeal concluded the trial court erred: the denial letter constituted a material violation of section 2923.6 because it substantially misstated the time Berman was allowed by the law to appeal HSBC’s denial of his application for a loan modification. Moreover, the Court found no merit in any of HSBC’s alternate arguments for affirming the trial court. View "Berman v. HSBC Bank" on Justia Law