Miles v. Deutsche Bank Nat'l Trust Co.

• Decision Date: 29 April 2015
• Docket Number: G050294
• Court: California Court of Appeals Court of Appeals
• Parties: John MILES, Plaintiff and Appellant, v. DEUTSCHE BANK NATIONAL TRUST COMPANY et al., Defendants and Respondents.

236 Cal.App.4th 394

186 Cal.Rptr.3d 625

John MILES, Plaintiff and Appellant

v.DEUTSCHE BANK NATIONAL TRUST COMPANY et al., Defendants and Respondents.

G050294

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

Filed April 29, 2015

Alessi & Koening, Ryan Kerbow and Thomas J. Bayard, Agoura Hills, for Plaintiff and Appellant.

Houser & Allison, Eric D. Houser, Brian J. Wagner, and Eileen M. Horschel, Irvine, for Defendants and Respondents.

OPINION

IKOLA, J.

This case involves allegations of a wrongful foreclosure and related causes of action. Plaintiff John Miles appeals from a judgment dismissing his breach of contract, fraud, and negligent misrepresentation causes of action pursuant to a sustained demurrer, and a summary judgment in favor of defendants on the wrongful foreclosure cause of action.

With respect to the demurred causes of action, we reverse. In the record before us, the court did not offer any explanation for its ruling. Based on our independent review of the complaint, we conclude plaintiff adequately stated his claims.

With respect to the wrongful foreclosure cause of action, we also reverse. The court granted summary judgment on the sole basis that plaintiff could not prove damages because he did not have any equity in the home when it was sold at a nonjudicial foreclosure sale. Wrongful foreclosure is a tort, however, and thus plaintiff may recover any damages proximately caused by defendants' wrongdoing. Plaintiff offered evidence that he lost rental income and suffered emotional distress as a result of the foreclosure. This is disputed, of course, but it is sufficient to survive a summary judgment motion.

I.The Demurrer

FACTS ALLEGED IN THE FIRST AMENDED COMPLAINT

Plaintiff owned property in Riverside. In July 2005, plaintiff refinanced the loan on his property with a total loan amount of $815,000. This was an adjustable rate mortgage. The loan was serviced by defendant HomEq Servicing (HomEq). For the first 21 months of the loan, plaintiff was current on his payments. During the period between June 2007 and September 2007, the monthly payment on the loan increased first to $5,968 per month, and then to $6,800 per month.

In August 2007, plaintiff applied for a loan modification to try making payments more affordable. In February 2008, HomEq informed plaintiff that he had to make “a lump sum $12,000 payment as a ‘modification processing fee’ before Plaintiff could ... see the terms of the proposed modification.” Plaintiff paid the fee. In March 2008, HomEq gave plaintiff a loan modification agreement, to which the parties agreed. Under the terms of that agreement, plaintiff's loan balance was increased to $834,051.86. The interest rate was fixed at 5.990 percent (the prior rate was 7.490 percent), and the monthly payment would be $6,236.78. Plaintiff made a payment under that agreement,¹ but the next month HomEq stated they would no longer honor the terms of that agreement. Instead, HomEq sent a new agreement that increased the loan balance to $870,767.34. It offered no explanation for the change.

Plaintiff believed the March 2008 agreement was valid, and thus he made payments to HomEq under that agreement for March, April, and June of 2008, totaling $18,789. In June 2008, HomEq sent plaintiff yet another loan modification agreement, this time raising the balance to $895,117.18, again without explanation.

In July 2008, HomEq sent correspondence to plaintiff demanding a payment of $35,684 to process a new loan modification. HomEq then began refusing plaintiff's payments under the March 2008 agreement, requiring that he pay $7,600 per month instead. When plaintiff insisted on the terms of the March 2008 agreement, HomEq recorded a notice of default and election to sell the property. In October 2008, HomEq recorded a notice of trustee's sale of the property with a sale date of November 20, 2008.

HomEq then informed plaintiff it would give him a new modification if he would send a payment of $14,050. In light of the looming sale date, plaintiff complied. Instead of sending a loan modification agreement, however, HomEq sent a forbearance agreement and demanded a payment of $1,450 before it would send a modification agreement.

Plaintiff continued trying to work with HomEq until February 2009, when HomEq sent another loan modification agreement, this time asking for an upfront payment of $29,771. “Having paid $44,000.00 over a 10 month period for modifications that never materialized, Plaintiff had no faith that any further payments would have any better result so he declined to make the requested payment.”

Defendants set a sale date for plaintiff's house of March 23, 2009. On March 19, 2009, plaintiff obtained a temporary restraining order against the sale of his house from the Riverside County Superior Court. Plaintiff alleges on information and belief that defendants had notice of the order. Nonetheless, defendants proceeded with the sale on March 23, 2009, and dispossessed plaintiff.

PROCEDURAL HISTORY

Plaintiff filed suit against defendants Deutsche Bank National Trust Company, the purported owner of the loan, and HomEq, which serviced the loan.² Defendants demurred to plaintiff's first amended complaint, and the court sustained the demurrer as to the causes of action for breach of contract, fraud, and negligent misrepresentation.³ The court did not give any indication of the basis of its ruling, and we were not provided a record of the hearing. The court gave plaintiff 30 days leave to amend, which plaintiff chose not to do.

Defendants then moved for summary judgment on the lone remaining cause of action for wrongful foreclosure, which the court granted (the facts and procedural history pertinent to the summary judgment motion will be discussed below). Plaintiff timely appealed.

DISCUSSION

“On appeal from a judgment dismissing an action after sustaining a demurrer ..., the standard of review is well settled. The reviewing court gives the complaint a reasonable interpretation, and treats the demurrer as admitting all material facts properly pleaded. [Citations.] The court does not, however, assume the truth of contentions, deductions or conclusions of law. [Citation.] The judgment must be affirmed ‘if any one of the several grounds of demurrer is well taken. [Citations.]’ [Citation.] However, it is error for a trial court to sustain a demurrer when the plaintiff has stated a cause of action under any possible legal theory.” (Aubry v. Tri–City Hospital Dist. (1992) 2 Cal.4th 962, 966–967, 9 Cal.Rptr.2d 92, 831 P.2d 317.)

We begin by quickly dispensing with an argument that runs throughout respondents' brief: “Plaintiff's fraud, breach of contract and negligent misrepresentation causes of action were not sustained without leave to amend, they were sustained with 30 days leave to amend. Plaintiff chose to not file a timely amended complaint pursuant to the trial Court's order and therefore voluntarily abandoned those causes of action. Plaintiff cannot appeal his decision not to pursue the other causes of action.” Defendants cite no authority for this remarkable proposition, and it would be an absurd rule indeed. If a plaintiff had already stated all available facts, but was given an opportunity to amend, how could forfeiture be avoided under defendants' rule? By making up facts? That is not the law. Even if given an opportunity to amend, a plaintiff may stand on the sufficiency of the complaint. (County of Santa Clara v. Atlantic Richfield Co. (2006) 137 Cal.App.4th 292, 312, 40 Cal.Rptr.3d 313 [“[w]hen a demurrer is sustained with leave to amend, and the plaintiff chooses not to amend but to stand on the complaint, an appeal from the ensuing dismissal order may challenge the validity of the intermediate ruling sustaining the demurrer”].) There was no forfeiture.

Next, defendants contend the demurrer to the breach of contract cause of action was properly sustained because the complaint “does not allege whether the contract was in writing, oral or implied.” (See Code Civ. Proc., § 430.10, subd. (g) [complaint demurrable if, “[i]n an action founded upon a contract, it cannot be ascertained from the pleading whether the contract is written, is oral, or is implied by conduct”].) This is a purely technical argument, as defendants' summary judgment motion demonstrates they knew which contract was at issue, were in possession of it, and thus knew it was in writing. The problem with this purely technical argument is that defendants did not comply with their own technicalities. Defendants' demurrer did not mention Code of Civil Procedure section 430.10, subdivision (g). Instead, the demurrer simply stated, “Plaintiff's third cause of action for breach of contract does not state facts sufficient to constitute a cause of action against Defendants. (Cal.Code Civ. Proc. §§ 430.10(e) and (f).)” We will not uphold a demurrer on a technicality not asserted in the trial court. Further, as noted above, plaintiff alleged that in March 2008, HomEq gave plaintiff a loan modification agreement, to which the parties agreed. And specific terms of that agreement are alleged, such as the balance of the loan, the interest rate, and the required monthly payments. A reasonable inference drawn from those allegations is that the contract plaintiff relies upon, the March 2008 modification agreement, was in writing.

Defendants' only remaining argument in support of the dismissal of the breach of contract cause of action is that plaintiff failed to attach the contract or to plead its terms verbatim. In support of that argument, defendants cite Otworth v. Southern Pac. Transportation Co. (1985) 166 Cal.App.3d 452, 459, 212 Cal.Rptr. 743 (Otworth ), which stated, “If the action is based on an alleged breach of a written contract, the terms must be set out verbatim in the body of the complaint or a copy of the written instrument must be attached and incorporated by reference.” The Otworth court did not offer any analysis to support that propositi...