Heritage Pac. Fin., LLC v. Monroy

• Decision Date: 31 July 2013
• Docket Number: A135274,A136043
• Citation: 156 Cal.Rptr.3d 26,215 Cal.App.4th 972
• Court: California Court of Appeals Court of Appeals
• Parties: HERITAGE PACIFIC FINANCIAL, LLC, Plaintiff, Cross-defendant, and Appellant, v. Maribel MONROY, Defendant, Cross-Complainant, and Respondent.

215 Cal.App.4th 972

156 Cal.Rptr.3d 26

HERITAGE PACIFIC FINANCIAL, LLC, Plaintiff, Cross-defendant, and Appellant,

v.Maribel MONROY, Defendant, Cross-Complainant, and Respondent.

A135274, A136043

Court of Appeal, First District, Division 2, California.

Filed March 29, 2013

Review Denied July 31, 2013

Affirmed.

See 1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, § 720 et seq.

Contra Costa County Superior Court, Hon. Judith S. Craddick. (Contra Costa County Super. Ct. No. C10–01607)

Attorneys for Plaintiff and Appellant: Law Offices of Mokri & Associates, Santa Ana, Brad A. Mokri, Jennifer N. Harris

Attorneys for Defendant and Respondent: Law Office of Peter Fredman, Berkeley, Peter B. Fredman

Lambden, J.

Maribel Monroy executed two promissory notes with WMC Mortgage Corp. (WMC) when purchasing a home in Richmond, California in 2006 (the Richmond property). After a foreclosure on the senior deed of trust, Heritage Pacific Financial, LLC (Heritage) acquired Monroy's second promissory note from WMC. Heritage sent Monroy a letter attached to a complaint and summons advising her that Heritage had filed a lawsuit against her alleging various fraud claims. The letter admonished that any misinformation provided by Monroy on her original loan application with WMC could result in civil liability and that Heritage would proceed with a lawsuit if it were unable to resolve the matter with Monroy. Monroy filed a cross-complaint against Heritage, alleging violations of the Rosenthal Fair Debt Collection Practices Act (Rosenthal Act) and the federal Fair Debt Collection Practices Act (FDCPA or the Act).

After permitting Heritage to amend its complaint three times, the trial court sustained Monroy's demurrer against Heritage's pleading on the grounds that Heritage had failed to provide or allege an assignment agreement with sufficient particularity to demonstrate that the assignment of Monroy's promissory note included an intent to assign WMC's tort claims against the borrower. Thereafter, Monroy moved for summary judgment or adjudication on her cross-complaint. The court denied her motion as to her claim of a violation of the Rosenthal Act but granted the motion as to a violation of the FDCPA, on the condition that Monroy agree to damages in the amount of one dollar. Monroy agreed to the damage award of one dollar and the court entered judgment in her favor. Subsequently, Monroy requested attorney fees and costs under title 15 of the United States Code section 1692k(a)(3), and the court found that Monroy was the prevailing party and entitled to attorney fees and costs in the amount of $89,489.60. The court concluded that the issues regarding the cross-complaint and complaint were interrelated and could not be reasonably separated. Heritage separately appealed the judgment and the award of attorney fees and we, on our own motion, consolidated the appeals.

On appeal, Heritage argues that it sufficiently set forth allegations to support a claim that the assignment from WMC included an intent to assign WMC's tort claims against Monroy and that the trial court improperly weighed the evidence when sustaining the demurrer without leave to amend. It also contends that triable issues of fact exist regarding Monroy's FDCPA claim and therefore the trial court erred in granting summary judgment. Finally, it objects to the award and amount of attorney fees. We are not persuaded by Heritage's argument, and affirm the judgment and the award of attorney fees.

It is true that incidental rights may include certain ancillary causes of action but the assignment agreement “must describe the subject matter of the assignment with sufficient particularity to identify the rights assigned.” ( Mission Valley East, Inc. v. County of Kern, supra, 120 Cal.App.3d at p. 97, 174 Cal.Rptr. 300.) “[A] basic tenet of California contract law dictates that when a particular right or set of rights is defined in an assignment, additional rights not similarly defined or named cannot be considered part of the rights transferred.” ( DC3 Entertainment, LLC v. John Galt Entertainment, Inc. (W.D.Wash.2006) 412 F.Supp.2d 1125, 1144.)

Here, none of the allegations regarding assignment in the SAC specified that the assignment was transferring the ancillary right of a tort claim. The document attached by Heritage did not support any claim of an assignment by WMC to Heritage of its fraud claims against Monroy. This document was the promissory note signed by Monroy, which, on the last page, contained the signature and stamp of the secretary of WMC. Directly under “Pay to the order of” was Heritage's stamp. The transfer of the promissory note by indorsement did not show a clear intent to assign WMC's fraud claim. (See Comm.Code, § 3201 et seq.) The conveyance of the promissory note to Heritage does not establish that WMC assigned to Heritage its right to the performance of other, distinct obligations owed by Monroy, such as the obligation to provide truthful information. (See Cambridge Co. v. City of Elsinore, supra, 57 Cal.App. at pp. 249–250, 206 P. 1021.)

Additionally, the allegations did not show an assignment of the tort claims based on custom and practice. “While no particular form of assignment is necessary, the assignment, to be effectual, must be a manifestation to another person by the owner of the right indicating his intention to transfer, without further action or manifestation of intention, the right to such other person, or to a third person. [Citation.]” ( Cockerell v. Title Ins. & Trust Co., supra, 42 Cal.2d at p. 291, 267 P.2d 16.) The parties' intention is determined by considering their words and acts as well as the subject matter of the contract. ( Lumsden v. Roth (1955) 138 Cal.App.2d 172, 175, 291 P.2d 88.) The assignment agreement in the present case is completely silent regarding any tort claim and nothing in the agreement suggests that the assignment included any rights other than those rights incidental to the contract rights. Heritage cannot allege general custom and practice to expand the assignment agreement to include ancillary rights not specified.

Heritage claims that the decision in National Reserve Co. v. Metropolitan Trust Co. (1941) 17 Cal.2d 827, 833, 112 P.2d 598 ( National Reserve ) supports its position that WMC's tort claims were assigned with the transfer of the note. Our Supreme Court in National Reserve stated that an unqualified assignment of a contract vests in the assignee “all rights and remedies incidental thereto.” ( Id. at p. 833, 112 P.2d 598.) Heritage then proceeds to cite portions of the following quote: “If ... an accrued cause of action cannot be asserted apart from the contract out of which it arises or is essential to a complete and adequate enforcement of the contract, it passes with an assignment of the contract as an incident thereof. Thus, the assignment of a contract passes from assignor to assignee an accrued cause of action for rescission [citations], and a creditor's assignee acquires the right to set aside a prior fraudulent conveyance by the debtor. [Citations.] As a corollary, if an assignor by express provision of a contract is denied the right to assert an accrued cause of action after he has assigned away his interest in the contract, the right to sue passes to his assignee. There would otherwise be no one to enforce the right.” ( Ibid.)

Heritage ignores the language in National Reserve, supra, 17 Cal.2d 827, 112 P.2d 598, which directly preceded the paragraph it quotes from the decision. In the preceding paragraph, the Supreme Court noted that incidental rights may “include certain ancillary causes of action arising out of the subject of the assignment and accruing before the assignment is made.” ( Id. at p. 833, 112 P.2d 598.) However, “[u]nless an assignment specifically or impliedly designates them, accrued causes of action arising out of an assigned contract, whether ex contractu or ex delicto, do not pass under the assignment as incidental to the contract if they can be asserted by the assignor independently of his continued ownership of the contract and are not essential to a continued enforcement of the contract.” ( Ibid.)

Applying the legal principles set forth in National Reserve to the present case, Heritage has failed to state a claim for a cause of action for fraud based on Monroy's loan application. Neither the indorsement nor the other allegations in the SAC authorize the assignment, specifically or impliedly, of WMC's tort claims. As already stressed, fraud is an ancillary cause of action to the promissory note.

Heritage maintains that it did not have to allege details and could simply allege a clear statement of the ultimate facts necessary to the cause of action. (See Lyon v. Master Holding Corp. (1942) 50 Cal.App.2d 238, 241, 122 P.2d 947.) Heritage claims that it was sufficient for it to plead the ultimate fact of ownership of the property at the time it filed this action and cites a 1924 case, Commercial Credit Co. v. Peak (1924) 195 Cal. 27, 32–33, 231 P. 340. This case does not help Heritage. Commercial Credit involved recovering the value of personal property or chattel. ( Id. at p. 29, 231 P. 340.) This case did not involve a promissory note; it did not involve a claim based on the assignment of a tort; nor did it involve claims based on fraud. Thus, Commercial Credit has no application to the present case. Heritage ignores that every element of a fraud cause of action must be pleaded specifically.

Finally, Heritage complains that the trial court was assessing the veracity of the allegations in the SAC, and cites the court's order instructing it to attach a writing to show an assignment as proof that the court improperly assessed the weight of the evidence. We disagree with Heritage's conclusion.

“A written contract may be pleaded either by its terms—set out verbatim in the complaint or a copy of the contract attached to the complaint and...