Adams v. Bank of Am., N.A.

• Decision Date: 30 June 2020
• Docket Number: A156712
• Citation: 265 Cal.Rptr.3d 415,51 Cal.App.5th 666
• Court: California Court of Appeals Court of Appeals
• Parties: Connie Caldwell ADAMS, Plaintiff and Appellant, v. BANK OF AMERICA, N.A., et al., Defendants and Respondents.

51 Cal.App.5th 666

265 Cal.Rptr.3d 415

Connie Caldwell ADAMS, Plaintiff and Appellant,

v.BANK OF AMERICA, N.A., et al., Defendants and Respondents.

A156712

Court of Appeal, First District, Division 3, California.

Filed June 30, 2020

Law Office of Peter H. Liederman and Peter H. Liederman, Berkeley, for Plaintiff and Appellant.

Severson & Werson, Jan T. Chilton, San Francisco, and Elizabeth C. Farrell, Irvine, for Defendants and Respondents.

Jackson, J. Plaintiff Connie Caldwell Adams obtained a loan secured by a deed of trust on certain residential property located in Vallejo. Subsequently, Adams obtained a second loan from a different lender secured by a second deed of trust on the same property. When Adams defaulted on the junior loan, the junior lienholder foreclosed and sold the property. The sold property was still subject to the senior loan. Almost 10 years later, Adams filed a complaint alleging Bank of America (lender on the senior loan) and ReconTrust Company (trustee on the senior loan) (collectively defendants) violated the Homeowner Bill of Rights (HBOR). She alleged that after she applied for a modification of the senior loan, defendants recorded a notice of default and notice of trustee's sale on the senior loan and failed to provide her with a single point of contact, all while her application was pending. Defendants moved for judgment on the pleadings, arguing Adams could not state a cause of action under the HBOR. The trial court granted the motion without leave to amend. Adams appeals. We conclude that the complaint failed to allege facts sufficient to state a cause of action under the HBOR but that the trial court abused its discretion when it denied Adams leave to amend. We reverse and remand.

FACTUAL AND PROCEDURAL BACKGROUND

In August 2006, Adams obtained a $422,750 loan secured by a deed of trust against residential property located on Wilson Avenue in Vallejo. The deed of trust names Adams as a " ‘Borrower.’ " The lender was America's Wholesale Lender, a fictitious name for Countrywide Home Loans, Inc. (Countrywide); Countrywide was acquired by Bank of America during the financial crisis. (See Petersen v. Bank of America Corp. (2014) 232 Cal.App.4th 238, 243, fn. 5, 181 Cal.Rptr.3d 330.) ReconTrust Company, an affiliate of Countrywide, was the trustee under the deed of trust. (See id . at p. 243 & fn. 4, 181 Cal.Rptr.3d 330.)

Later in August 2006, Adams obtained a $28,000 loan from an individual named Peter Gallegos, secured by a separate deed of trust recorded against the same property. Adams subsequently defaulted on the junior loan, resulting in foreclosure and a trustee's sale of the property in March 2008. Gallegos was the purchaser.¹ The sold property was still subject to the senior loan. Adams remained the " ‘Borrower’ " named on the deed of trust securing the senior loan.

In March 2017, Adams filed for chapter 7 bankruptcy. The order for discharge was filed in September 2017.

In December 2017, Adams filed a complaint against Bank of America and ReconTrust Company alleging a single cause of action for "Violations of the Homeowners’ Bill of Rights." The complaint alleged that, in 2016 and 2017, Adams was "engaged in ongoing good faith negotiations with Bank of America toward the modification of a home loan [the senior loan] on his [sic ] property at 372 Wilson Avenue, Vallejo, California, within this County." It alleged that "[a]t the same time, defendant bank was actively moving toward foreclosure of the home and took clear steps to satisfy this state's requirements toward a non-judicial foreclosure, including recording a notice of default and notice of trustee's sale. At present, and despite the ongoing good faith negotiations, the trustee's sale is schedule [sic ] for January 3, 2018."

The complaint also alleged that, during this loan modification application process, "Bank of America did not provide [a] single point of contact, and instead plaintiff was shuttled from representative to representative, with the ultimate result being the home is facing foreclosure." In her prayer, Adams sought injunctive relief, declaratory relief, damages, "judgment quieting plaintiff's fee simple title to the real property and that defendants have no right, title, or interest in or to the real property," "equitable accounting to the alleged indebtedness," prejudgment interest, attorney's fees, and costs of suit.

Defendants moved for judgment on the pleadings, arguing the complaint failed to state facts sufficient to constitute a cause of action under the HBOR. Adams did not file an opposition. On December 19, 2018, the trial court granted the motion for judgment on the pleadings without leave to amend. On January 8, 2019, Adams attempted to file an amended complaint, but the filing was rejected by the court clerk. Judgment was entered on January 14, 2019. Plaintiff then filed a motion to reconsider, which was denied. This appeal followed.

DISCUSSION

I. Standard of Review

A judgment on the pleadings in favor of the defendant is appropriate when the complaint fails to allege facts sufficient to state a cause of action. ( Code Civ. Proc., § 438, subd. (c)(3)(B)(ii).) A motion for judgment on the pleadings is equivalent to a demurrer and is governed by the same de novo standard of review. ( Kapsimallis v. Allstate Ins. Co. (2002) 104 Cal.App.4th 667, 672, 128 Cal.Rptr.2d 358.) All properly pleaded, material facts are deemed true, but not contentions, deductions, or conclusions of fact or law. ( Ibid. ) Courts may consider judicially noticeable matters in the motion as well. ( Ibid. ; People ex rel. Harris v. Pac Anchor Transportation, Inc. (2014) 59 Cal.4th 772, 777, 174 Cal.Rptr.3d 626, 329 P.3d 180.)

When a demurrer is sustained without leave to amend, we decide whether there is a reasonable possibility that the defect can be cured by amendment. ( Sanchez v. Truck Ins. Exchange (1994) 21 Cal.App.4th 1778, 1781, 26 Cal.Rptr.2d 812.) " ‘[I]f it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm.’ " ( Ibid. ) "This abuse of discretion is reviewable on appeal ‘even in the absence of a request for leave to amend’ ...." ( Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 970–971, 9 Cal.Rptr.2d 92, 831 P.2d 317 ); (see Code Civ. Proc., § 472c, subd. (a).) Plaintiff has the burden to show there is a reasonable possibility the complaint's defects can be cured by amendment. ( Sanchez , at p. 1781, 26 Cal.Rptr.2d 812.)

II. HBOR Cause of Action

Adams contends she has a valid cause of action under the provisions of the HBOR that prohibit dual tracking and require a single point of contact. The issue before us is whether the facts alleged in Adams's complaint together with matters that are subject to judicial notice are sufficient to state a cause of action under that theory.

The HBOR was enacted "to ensure that, as part of the nonjudicial foreclosure process, borrowers are considered for, and have a meaningful opportunity to obtain, available loss mitigation options, if any, offered by or through the borrower's mortgage servicer, such as loan modifications or other alternatives to foreclosure." ( Civ. Code, § 2923.4.)² Among other things, the HBOR prohibits dual tracking, whereby a financial institution continues to pursue foreclosure while evaluating a borrower's loan modification application. (§ 2923.6, subd. (c).) The HBOR also requires that a mortgage servicer establish a single point of contact and provide a borrower who requests a foreclosure prevention alternative with one or more direct means of communication with the single point of contact. (§ 2923.7, subd. (a).) A violation of either of these provisions can serve as the basis for a cause of action under the HBOR. The HBOR provides for injunctive relief for statutory violations that occur prior to foreclosure (§ 2924.12, subd. (a)) and monetary damages when the borrower seeks relief for violations after the foreclosure sale has occurred. (§ 2924.12, subd. (b); see Valbuena v. Ocwen Loan Servicing, LLC (2015) 237 Cal.App.4th 1267, 1272, 188 Cal.Rptr.3d 668.)

The dual tracking and single point of contact provisions of the HBOR do not apply to all mortgages and deeds of trust. Pursuant to section 2924.15, they apply only to "first lien mortgages or deeds of trust that are secured by owner-occupied residential real property containing no more than four dwelling units." On appeal, defendants argue that Adams's HBOR cause of action fails as a matter of law because she cannot meet the statutory definition of "owner-occupied." Specifically, defendants argue that Adams fails to meet this definition because she does not currently own the property. We turn to the statutory definition of "owner-occupied" first.

A. HBOR's Definition of "Owner-occupied"

Section 2924.15 defines the term "owner-occupied" for the HBOR's dual tracking and single point of contact provisions. It states, "For these purposes, ‘owner-occupied’ means that the property is the principal residence of the borrower and is security for a loan made for personal, family, or household purposes." (§ 2924.15.)

" ‘When a statute prescribes the meaning to be given to particular terms used by it, that meaning is generally binding on the courts.’ " ( Great Lakes Properties, Inc. v. City of El Segundo (1977) 19 Cal.3d 152, 156, 137 Cal.Rptr. 154, 561 P.2d 244 ( Great Lakes ), quoting People v. Western Air Lines, Inc. (1954) 42 Cal.2d 621, 638, 268 P.2d 723.) The HBOR's internal definition of "owner-occupied" is controlling.

B. Defendants’ Arguments Regarding "Owner-occupied"

Despite this internal definition, defendants raise four arguments to support the conclusion that the term "owner-occupied" includes an ownership requirement. First, they argue that section 2924.15's definition of "owner-occupied" only applies to the word "occupied" and not to the full term. We reject this argument as the HBOR clearly prescribes a definition for the...