Akopyan v. Wells Fargo Home Mortg., Inc., B236455

CourtCalifornia Court of Appeals
Writing for the CourtEPSTEIN
PartiesLEVON AKOPYAN et al., Plaintiffs and Appellants, v. WELLS FARGO HOME MORTGAGE, INC., Defendant and Respondent. NASSER JAWHER et al., Plaintiffs and Appellants, v. AURORA LOAN SERVICES, LLC., Defendant and Respondent.
Decision Date04 April 2013
Docket NumberB236456,B236455

LEVON AKOPYAN et al., Plaintiffs and Appellants,
v.
WELLS FARGO HOME MORTGAGE, INC., Defendant and Respondent.

NASSER JAWHER et al., Plaintiffs and Appellants,
v.
AURORA LOAN SERVICES, LLC., Defendant and Respondent.

B236455
B236456

COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION FOUR

Filed: April 4, 2013


CERTIFIED FOR PUBLICATION

(Los Angeles County Super. Ct. No. BC441783)

(Los Angeles County Super. Ct. No. BC455579)

APPEALS from judgments of the Superior Court of Los Angeles County, Jane Johnson, Judge. Affirmed.

Kabateck Brown Kellner, Brian S. Kabateck, Richard L. Kellner, Evan M. Zucker; The Wentz Law Firm, Richard B. Wentz, Jean M. Wentz; Cohen Milstein Sellers & Toll,

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Andrew N. Friedman, Douglas J. McNamara, and Stefanie M. Ramirez, for Plaintiffs and Appellants.

Severson & Werson, Jan T. Chilton, Michael J. Steiner, Sunny S. Huo, and Erik Kemp, for Defendants and Respondents.

These consolidated appeals, each from a judgment of dismissal of a class action complaint after a sustained demurrer, raise two questions. The first is whether the limitation on late payment charges in Business and Professions Code section 10242.5, subdivision (b)1 applies to home mortgage loans negotiated by mortgage loan brokers, regardless of the exempt status under section 10133.1 of entities that funded and serviced the loans. We conclude the statutory limitation on late fees applies to these loans.

The second question is whether an action lies by appellant borrowers against the federally regulated entities that serviced the loans for breach of contract, on the theory that the payment application requirement in section 10242.5, subdivision (b) was implicitly incorporated into each loan by operation of law, and the servicers misapplied payments and charged late fees in violation of that implied term. We conclude that appellants' contract claims are preempted by the National Bank Act (12 U.S.C. § 1 et seq.) (NBA) and the Home Owners Loan Act (12 U.S.C. § 1461 et seq.) (HOLA) respectively.

Both judgments are affirmed.

FACTUAL AND PROCEDURAL SUMMARY

According to the operative first amended complaint in case No. B236455, appellants Levon and Tagouhi Akopyan entered into a home mortgage loan with Aames Funding Corporation in 2003. The note contained a late payment provision, allowing the

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holder to impose a late fee after a 10-day grace period and setting the late fee at six percent of the overdue payment. In 2005, appellant Armenui Karapogosyan entered into a home mortgage loan with WMC Mortgage Corporation. The note set a 15-day grace period for payments and a late fee of five percent for the overdue payment. Each of these notes permitted that late fees be applied only once to an overdue payment. The complaint alleges the loans were negotiated by a licensed mortgage loan broker.

At some point, Wells Fargo Home Mortgage, Inc.,2 began servicing the loans. Payments were due on the first day of each month. The Akopyans did not make the payment due on December 1, 2007, and were assessed a late fee on December 17, 2007. The payment they made on December 31, 2007, was applied to the past due December installment, resulting in their failure to pay the January 2008 installment. They were assessed another late fee on January 16, 2008. Similarly, Karapogosyan, who did not make the payment due on March 1, 2007, but made a payment on March 30, 2007, was assessed late fees in both March and April 2007.

The complaint in case No. B236456 alleges that, in 2007, appellants Nasser Jawher and Miguel Martinez entered into home mortgage loans with American Home Equity Corporation and American Brokers Conduit respectively. The late payment provisions in their notes were similar to the provisions in Karapogosyan's note. The complaint also alleges these loans were negotiated by licensed mortgage brokers. At some point respondent Aurora Loan Services, LLC (Aurora) began servicing the loans. In 2008 and 2009, Jawher was assessed late fees eight times because his payments were applied to past due installments. In 2009, Martinez was charged three late fees for the same reason.

On all these loans, respondents applied appellants' payments to installments in the order they became due, resulting in successive late payments and fees. Appellants sued respondents for breach of contract on the theory that, since the loans were made in

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California, each incorporated the requirement in section 10242.5, subdivision (b), that a payment made within 10 days of the due date of an installment must be applied to that installment. By applying payments made within 10 days of scheduled installments to past due installments, respondents allegedly breached the terms of the loans they serviced. The complaints also included causes of action for unfair business practices under the Unfair Competition Law (§ 17200 et seq.), for unjust enrichment, and for declaratory relief.

The trial court sustained respondents' demurrers on two alternative grounds: that section 10133.1 exempted Wells Fargo and Aurora from section 10242.5, and that the breach of contract claims were preempted by federal law. The court ruled that the unfair business practices claims and the requests for declaratory relief failed for the same reasons. The court also ruled that the existence of an express contract precluded relief for unjust enrichment. Both cases were dismissed.

We consolidated the timely appeals.

DISCUSSION

I

We review de novo the judgment (order of dismissal) entered after a demurrer is sustained to determine whether the complaint alleges facts sufficient to state a cause of action on any legal theory. (Committee for Green Foothills v. Santa Clara County Bd. of Supervisors (2010) 48 Cal.4th 32, 42.) We assume well-pleaded factual allegations to be true, but also consider matters that properly have been judicially noticed. (Ibid.)

Appellants' breach of contract claims are based on the theory that section 10242.5 was incorporated into the loans by operation of law. The trial court ruled that section does not apply to the loans because Wells Fargo and Aurora are exempt under section 10133.1. It did not reach respondents' alternative argument that section 10133.1 also exempts the lenders that initially funded the loans. We agree with appellants that, while section 10133.1 exempts certain entities from the licensing requirements applicable to

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mortgage loan brokers, it does not exempt loans negotiated by brokers with exempt entities.

A. The Statutory Scheme

To determine the legislative intent of statutory provisions and effectuate their purpose, we examine their language """with reference to the entire scheme of law of which [they are a] part so that the whole may be harmonized and retain effectiveness.""" (State Farm Mutual Automobile Ins. Co. v. Garamendi (2004) 32 Cal.4th 1029, 1043.)

Sections 10133.1 and 10242.5 are among the licensing provisions in part 1, chapter 3, articles 1 and 7, respectively, of the Real Estate Law (§10000 et seq.). The purpose of the licensing requirements is to protect the public from incompetent or untrustworthy practitioners. (All Points Traders, Inc. v. Barrington Associates (1989) 211 Cal.App.3d 723, 729.) To that end, all real estate brokers in California must be licensed. (§ 10130.) In relevant part, section 10131, subdivision (d) defines a real estate broker as a person who, for compensation or expectation of compensation, "[s]olicits borrowers or lenders for or negotiates loans or collects payments or performs services for borrowers or lenders or note owners in connection with loans secured directly or collaterally by liens on real property or on a business opportunity." These activities describe the business of a mortgage loan broker. (Winnett v. Roberts (1986) 179 Cal.App.3d 909, 919, citing Wyatt v. Union Mortgage Co. (1979) 24 Cal.3d 773, 782.)

Loans made or negotiated by mortgage loan brokers are subject to article 7, section 10240 et seq. (§ 10248.3.) Most provisions of this article apply only to certain small residential mortgage loans, with a principal amount less than $30,000 if secured by a first deed of trust or less than $20,000 if secured by a junior deed of trust. (§§ 10240.1, 10240.2, 10245.) A few provisions, including section 10242.5, apply to bona fide loans without a limitation on their principal amount. (§ 10245.) Section 10242.5 limits the charge for a late payment to 10 percent of the installment due or a minimum of $5, and provides for a 10-day grace period. It also provides that a late payment fee may be charged only once for the same late installment, and that a payment made within 10 days

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of a scheduled installment's due date must be applied to that installment. (§ 10242.5, subd. (a), (b).)

Section 10133.1, subdivision (a) exempts from section 10131, subdivision (d) and article 7 "(1) [a]ny person or employee thereof doing business under any law of this state, any other state, or the United States relating to banks, trust companies, savings and loan associations, industrial loan companies, pension trusts, credit unions, or insurance companies. . . . [¶] (6) Any person licensed as a finance lender when acting under the authority of that license. . . . [¶] (10) Any person licensed as a residential mortgage lender or servicer when acting under the authority...

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