Galyardt v. Specialized Loan Servicing LLC

CourtCalifornia Court of Appeals
PartiesMICHELLE C. GALYARDT, Plaintiff and Respondent, v. SPECIALIZED LOAN SERVICING LLC et al, Defendants and Appellants.
Decision Date18 May 2022
Docket NumberE074731

NOT TO BE PUBLISHED

APPEAL from the Superior Court of Riverside County. No. MCC1600152 Rick S. Brown, Judge. (Retired judge of the Santa Barbara Super. Ct. assigned by the Chief Justice pursuant to art. VI § 6 of the Cal. Const.) Affirmed in part; reversed in part.

The Ryan Firm, Timothy M. Ryan, Andrew Mase and Katherine K Meleski for Defendants and Appellants.

Louis White Law, Jamil L. White, Andrey R. Yurtsan; Esner, Chang & Boyer, Stuart B. Eisner, Andrew N. Chang and Kathleen J. Becket for Plaintiff and Respondent.

OPINION

MILLER J.

Defendant and appellant Residential Mortgage Solution (the Bank) purchased a loan that was secured by a deed of trust on a house, which plaintiff and respondent Michelle Galyardt (Galyardt) owned. Defendant and appellant Specialized Loan Servicing (the Servicer) was the servicer for the loan. The trustee for the deed of trust foreclosed on Galyardt's house. Galyardt sued the Bank and the Servicer (collectively the Lenders) for intentional misrepresentation, negligent misrepresentation, and fraudulent concealment.

Following an 11-day jury trial, the jury found in favor of Galyardt on the intentional misrepresentation and negligent misrepresentation causes of action. The jury awarded the following damages: (A) $8, 232.31 for economic damages; (B) $430, 000 for past non-economic damages; (C) $480, 000 for future non-economic damages; (D) $2, 160, 000 in punitive damages against the Servicer; and (E) $680, 000 in punitive damages against the Bank.

The Lenders raise nine issues on appeal. First, the Lenders contend the trial court erred by excluding evidence of Galyardt's loan modifications. Second, the Lenders assert substantial evidence does not support the punitive damages awards. Third, the Lenders contend the punitive damages award against the Bank was improper because the evidence reflects the Bank had a negative net worth. Fourth, the Lenders assert the punitive damages awards were excessive. Fifth, after the Lenders pointed out, during closing argument, that Galyardt had failed to provide evidence of the Lenders' finances the trial court erred by bifurcating the issue of the amount of punitive damages, over the Lenders' objection, and ordering the Lenders to provide evidence of their finances.

Sixth, the Lenders assert the trial court erred by denying their motion for mistrial, which was based on juror misconduct. Seventh, the Lenders contend the trial court failed to conduct an adequate inquiry into the juror misconduct. Eighth, the Lenders assert there was a pattern of juror misconduct in the case. Ninth, the Lenders contend the trial court lacked authority to grant relief from a stipulation pertaining to the admissibility of certain exhibits. We affirm in part and reverse in part.

FACTUAL AND PROCEDURAL HISTORY

From 1991 to 2006, Galyardt and her husband, Jeffrey Galyardt (Husband), owned a house in Spring Valley, in San Diego County. Galyardt and Husband sold the house in Spring Valley and made $100, 000 in profit from the sale. In September 2006, Galyardt obtained a bank loan of $374, 750 to purchase a house in Hemet (the House) for $475, 000. Galyardt paid the $100, 000 from the Spring Valley sale to purchase the House.

In September 2013, Galyardt missed payments on the loan for the House. The loan payments were missed due to Husband being injured at work and his income being reduced after his disability benefits terminated.

In addition to the missed loan payments, Galyardt's account developed an escrow shortage, which means the Lenders were paying the taxes and insurance for the House, but Galyardt was not giving the Lenders the money for those payments. The Lenders pay the taxes on loans that are in arrears because "taxes are a super priority lien above the mortgage." The Lenders pay the insurance on loans that are in arrears because "properties need[] to be insured against any fire, damage, vandalism, whatever could happen." In June 2015, Galyardt had an escrow shortage of $2, 186. In order to assist Galyardt, the Servicer divided that sum into 36 monthly payments of $60.73, which was added to Galyardt's monthly loan payments.

In fall 2015, Galyardt's monthly loan payment was approximately $2, 006.52. That amount "included $1, 432 of principal, $400 approximately of taxes, $100 of insurance, and $60.73 for the [escrow shortage]." In 2015, Husband graduated from nursing school, obtained a job as a registered nurse, and began earning more money than he earned prior to his injury. Galyardt and Husband's monthly income was $7, 000 to $8, 000.

In September 2015, Galyardt applied for the Keep Your Home California (KYHC) program. KYHC was a government program that helped borrowers who were $54, 000 or less in arrears on their home loans. KYHC aided borrowers by paying up to $54, 000 to have their loans reinstated. Banks and loan servicers were not required to participate in the KYHC program-it was voluntary. If a lender or servicer did not want to participate in the KYHC program for a particular loan, it could decline to do so by sending a written objection to KYHC.

If the Servicer chose to participate in the KYHC program, then the Servicer had to send KYHC paperwork verifying the reinstatement amount for the loan at issue. The reinstatement amount provided by a servicer to KYHC had to be valid for a minimum of 21 days. In February 2016, there was not a maximum number of future days that could be included for the validity of the reinstatement amount. Generally, servicers provided reinstatement amounts that were valid for 21 to 40 days. However, if KYHC received a reinstatement amount that projected more than 30 days in the future, then KYHC "would contact the servicer and request them to submit the total past due to exclude one of the future-the future payment."

In September 2015, the Servicer sent Galyardt a letter reflecting that her loan reinstatement amount was $47, 725.57 for payments due through September 1, 2015. Galyardt applied for assistance from KYHC in September 2015. In October 2015, the Servicer sent Galyardt a letter reflecting that her loan reinstatement amount was $52, 289.96 for payments due through November 1, 2015. Also in October 2015, a "Notice of Default and Election to Sell Under the Deed of Trust" (all caps. omitted) was recorded by the Trustee, the Law Offices of Les Zieve (the Trustee).

In November 2015, the Servicer reported to KYHC that the reinstatement amount for Galyardt's loan was $58, 482.51 if the reinstatement date were January 2, 2016. It was the Servicer's policy to project two months into the future when giving a reinstatement amount and date to KYHC. The Servicer added the two future months because that is how it was trained by KYHC to calculate reinstatement dates. In addition to the monthly loan arrears, the Servicer separately included the $2, 186 for the escrow shortage in the fees owed by Galyardt. That amount had already been divided into 36 payments and added to the monthly loan payment. Thus, if the $2, 186 had been paid along with the monthly loan arrears, then the $2, 186 would have been paid twice.

On November 30, 2015, KYHC denied Galyardt's application due to her reinstatement amount being more than $54, 000.

In December 2015, the Servicer sent Galyardt a letter reflecting the reinstatement amount was $56, 453.29 for payments due through December 1, 2015. On December 3, 2015, Husband called the Servicer and spoke to a representative named Ron. Husband told Ron that Galyardt would make a $4, 400 payment that would bring the reinstatement amount below $54, 000. Ron told Husband to fax a letter to the Servicer explaining that Galyardt would pay the $4, 400 difference between the reinstatement amount and the $54, 000. Galyardt sent the letter to the Servicer and overnighted a cashier's check for $5, 000.

On December 29, 2015, Galyardt reapplied to KYHC. In January 2016, the Servicer sent Galyardt a letter reflecting the reinstatement amount was $55, 272.80 for payments due through February 1, 2016. The $5, 000 payment was reflected in the accounting that totaled $55, 272.80. The $55, 272.80 reinstatement amount was valid through February 12, 2016.

On January 11, 2016, the Bank sent the Servicer a note that read," '[The Bank] wants to make sure nothing will hinder a sale date from being issued in January 2016. Who can [the Bank] speak to regarding this loan to make sure that the foreclosure sale date is proceeding? It looks like [the Servicer] claims he is working with [KYHC] and [the Servicer] took the [$5, 000] monies on file posted [sic]. These funds should not be posted, and foreclosure should proceed, unless a full reinstatement is received. If there is no full reinstatement, the money should be returned. We don't want to hold up the foreclosure process.' "

On January 14, 2016, Galyardt sent a $2, 000 check to the Servicer and a letter explaining that the $2, 000 was meant to pay the difference between the reinstatement amount and the $54, 000. On January 22, 2016, the Servicer sent Galyardt a letter reflecting the reinstatement amount was $53, 272.80 for payments due through February 1, 2016. That reinstatement amount was valid through February 8, 2016. On January 28, 2016, the Trustee recorded a Notice of Trustee's Sale with a sale date of February 26, 2016.

On February 1, 2016, Husband called the Servicer and spoke with a representative named Emily. The following is an excerpt of their conversation:

"[Emily] This is good through . . . let me see. The figures are good through ...

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