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

• Decision Date: 17 May 2016
• Docket Number: D067623
• Parties: GENEROSO RUSSO, Plaintiff and Appellant, v. BANK OF AMERICA, N.A., Defendant and Appellant.
• Court: California Court of Appeals Court of Appeals

GENEROSO RUSSO, Plaintiff and Appellant, v. BANK OF AMERICA, N.A., Defendant and Appellant.

D067623

COURT OF APPEAL, FOURTH APPELLATE DISTRICT DIVISION ONE STATE OF CALIFORNIA

May 17, 2016

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Super. Ct. No. 37-2012-00095724-CU-OR-CTL)

APPEALS from a judgment and postjudgment order of the Superior Court of San Diego County, John S. Meyer, Judge. Affirmed.

John L. Staley for Plaintiff and Appellant.

Severson & Werson and Kerry W. Franich, Jan T. Chilton, Matthew A. Garfinkle for Defendant and Appellant.

Plaintiff and appellant Generoso Russo sued defendant and appellant Bank of America, N.A. (Bank) for Bank's actions in, among other things, unilaterally imposing an impound account on his loan, claiming Russo was in default, failing to credit his payments, and initiating foreclosure proceedings against him. The jury entered special verdicts in Russo's favor on his claims for breach of contract and negligence, awarding him $523.14 in contract damages, and the trial court found in Russo's favor on his claim for unfair business practices in violation of the Unfair Competition Law (UCL; Bus. & Prof. § 17200, et seq.). The jury entered verdicts in Bank's favor on Russo's claims for fraud, misrepresentation and elder abuse. Before trial, the court denied as procedurally infirm and untimely Russo's motion for leave to amend to add a cause of action for intentional infliction of emotional distress, without prejudice to a later motion for leave to amend according to proof. After the jury returned its special verdict, the court denied Russo's motion for an award of attorney fees and costs brought under Civil Code section 1717 and Code of Civil Procedure section 1021.5, and also denied Bank's motion for attorney and expert witness fees brought in part under Code of Civil Procedure section 998.

Russo appeals from the judgment, and both he and Bank appeal from the postjudgment order denying attorney fees and costs. Russo contends he was the prevailing party on the contract and his UCL claim, entitling him to attorney fees under Civil Code section 1717 and Code of Civil Procedure section 1021.5. He also contends the trial court erred under Code of Civil Procedure sections 473 and 576 by denying his motion for leave to amend to add a cause of action for intentional infliction of emotional distress. Bank contends the court abused its discretion by denying it an award of attorney fees and costs. We reject the parties' contentions and affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

Since 1978, Russo has owned a single family residence in Poway, California. During this time, Russo declined an impound account for his property taxes and insurance, directly paying those expenses himself. In 2003, Russo refinanced his loan with Bank, and executed an impound account waiver. Russo was never late with his mortgage payments.

In 2009, Russo, who was then retired, received a solicitation from Bank for a loan modification, and he inquired into the possibility of decreasing his mortgage payment. Russo's conversation with the Bank representative did not include any discussion of an impound account. In December 2009, Russo made a timely payment on his property taxes. Thereafter, an individual with Bank checked the status of Russo's December 2009 property tax payment, and, believing Russo was delinquent, notified him on December 11, 2009 (one day after the December 10, 2009 deadline), that he was delinquent and placed an impound account on his loan. Though Bank eventually received a refund for the property taxes it had paid on Russo's behalf because Russo had in fact paid them, Bank did not cancel the impound account because Russo was under a home loan modification review under the Making Homes Affordable (MHA) program, and the impound account remained even without any delinquency on Russo's part.

Russo ignored Bank's requirement that he pay impound fees, and he chose not to pay the increased amount of his loan. Though Russo continued to make timely mortgage payments in the original amount, Bank started rejecting or not applying them because his payments did not include the impound. In March 2010, Bank determined that Russo wasnot eligible for an MHA loan modification. Though Russo's loan did not qualify under MHA guidelines, Bank's loan modification review continued.

In July 2011, Bank recorded a notice of default on Russo's property, commencing foreclosure proceedings. It eventually reported Russo's defaults to credit agencies. Thereafter, Bank rejected Russo's timely mortgage payments, and in October 2011, it recorded a notice of trustee's sale. Days before the foreclosure sale, Russo paid to reinstate his loan.

Russo sued Bank, alleging causes of action for financial elder abuse, negligence, breach of contract, violation of the UCL, fraud and declaratory relief. During the proceedings, Bank served on Russo two settlement offers under Code of Civil Procedure section 998 (998 offers).¹ In June 2013, Bank offered to resolve all of Russo's claims and sought-after relief for $100,001.00. In April 2014, Bank offered to compromise Russo's claims for $250,000 and up to $115,000 in attorney fees and costs. Russo rejected both offers. In May 2014, Russo advanced a settlement offer for $450,000.

The matter proceeded to a jury trial. Before trial, the court granted Bank's motion in limine to bar Russo from presenting evidence that he had suffered a stroke as a resultof his dispute with Bank, on grounds Russo did not present evidence of causation to a reasonable medical certainty or probability. Russo's counsel unsuccessfully argued that he would say his client did not have high blood pressure or stress in his life until he had the dispute with Bank.

During trial, Russo presented an expert who opined that had Bank not reported Russo's defaults, Russo would have qualified for new loans and refinanced in 2010 and 2012, saving him approximately $104,500.00 over 21 years. Russo's counsel argued to the jury that if Bank had not breached its contract with Russo and damaged his credit, Russo would have realized those savings with a better loan, which, reduced to its present value, was approximately $75,000 in out-of-pocket damages as well as about $500 in foreclosure fees Russo paid. The court instructed the jury that Russo claimed contract damages for "out of pocket costs, such as foreclosure fees and expenses and overpayments as a result of the escrow account" and also "has suffered damages because he has not been able to refinance his loan." Russo also argued that the jury should award him $720,000 (amounting to double the value of his home) as emotional distress damages, and an additional sum for punitive damages.

Shortly before the jury returned its verdicts, Russo offered to settle with Bank for $2.5 million. The jury returned special verdicts on Russo's contract, negligence, fraud and financial elder abuse claims. It found Bank breached a contract, and that Russo's total economic loss was $523.14. It found Bank was negligent and caused Russo harm, but that Russo suffered no damages. The jury assigned equal responsibility to both Bankand Russo for Russo's harm. The jury found in Bank's favor on Russo's claims for fraud and financial elder abuse.

Russo moved for entry of judgment on his UCL claim. Following a hearing on the matter, the court found Bank had violated the UCL, but that any award to Russo was "subsumed by the jury's award of damages." It found Russo was the prevailing party on that claim. It entered a nonsuit on Russo's claim for declaratory relief. The court eventually entered judgment in Russo's favor on his contract, negligence and UCL claims, and in Bank's favor on Russo's claims for fraud, financial elder abuse, and declaratory relief.

Russo moved for an award of $175,635 in attorney fees and $11,822.07 in costs under Civil Code section 1717 as the prevailing party on his contract and negligence claims, and also as a private attorney general under Code of Civil Procedure section 1021.5. Russo additionally argued that Bank's 998 offers did not bar him from recovering post-offer attorney fees and costs because Civil Code section 1717 prevailed over Code of Civil Procedure sections 998 and 1032, but if that were not the case, he was entitled to his pre-998 offer fees and costs of $42.672.03.

Bank also moved for its fees and costs. It argued that given Russo's nominal recovery and failure to achieve his litigation objective, Bank was necessarily the prevailing party on Russo's claims, all of which involved the note and deed of trust at issue in Russo's contract claim. Bank further argued that it was the prevailing party and entitled to its post-998 offer costs, including attorney fees and expert witness fees by operation of Code of Civil Procedure section 998.

The trial court denied both parties' motions. It ruled Russo was the prevailing party under Code of Civil Procedure section 1032.² It further observed that Civil Code section 1717 entitles a party to attorney fees when that party obtains a simple, unqualified victory by completely prevailing on all of its contract claims and that a plaintiff will not automatically prevail for purposes of that statute when he does not achieve all of his litigation objectives. The court ruled Russo did not bring a simple breach of contract claim, but asked for $795,000 plus punitive damages, was awarded only $523.14 and no damages on his negligence claim, and did not prevail on his claims for financial elder abuse and fraud. It found as to the litigation as a whole, Russo did not achieve his litigation objectives and that as a result, there was no party prevailing on...