Lueras v. Bac Home Loans Servicing, LP

221 Cal.App.4th 49

163 Cal.Rptr.3d 804

Richard LUERAS, Plaintiff and Appellant,

v.BAC HOME LOANS SERVICING, LP, et al., Defendants and Respondents.

G046799

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

Filed 10/31/2013

See 4 Witkin, Summary of Cal. Law (10th ed. 2005) Security Transactions in Real Property, § 145.

Appeal from a judgment of the Superior Court of Orange County, Kirk H. Nakamura, Judge. Affirmed in part, reversed in part, and remanded. Motion to strike portions of appellant's reply brief. Granted. (No. 30–2011–00481113)

Law Offices Of Lenore Albert and Lenore L. Albert, Irvine, for Plaintiff and Appellant.

Reed Smith, David J. de Jesus and Adam M. Forest, San Francisco, for Defendants and Respondents.

OPINION

FYBEL, ACTING P.J.

Introduction

Richard Lueras appeals from a judgment entered after the trial court sustained without leave to amend a demurrer to his verified first amended complaint (the First Amended Complaint). After the foreclosure sale of his home, Lueras sued Bank of America, N.A., successor by merger to BAC Home Loans Servicing, LP (Bank of America), ReconTrust Company, N.A. (ReconTrust), and Federal National Mortgage Association, commonly called and referred to as “Fannie Mae.” The First Amended Complaint asserted causes of action for negligence, breach of contract, violation of the Perata Mortgage Relief Act (Civ.Code, § 2923.5), fraud/misrepresentation, unfair and unlawful practices (Bus. & Prof.Code, § 17200), and to quiet title.

The First Amended Complaint included no allegations directed specifically to Fannie Mae, and we therefore affirm the judgment in its favor. As to Bank of America and ReconTrust, we affirm the judgment as to the causes of action for violation of Civil Code section 2923.5 and to quiet title, but, in all other respects, reverse and remand to permit Lueras to amend the First Amended Complaint.

The key fact alleged in the First Amended Complaint is that a mere 13 days before Bank of America foreclosed on Lueras's home, Bank of America falsely represented in writing to Lueras that no foreclosure sale would occur while Lueras was being considered for “other foreclosure avoidance programs.” In so doing, Bank of America expressly and in writing informed Lueras he “will not lose [his] home during this review period.” A Bank of America representative also informed Lueras the pending foreclosure sale would be postponed. Nevertheless, days later, Bank of America foreclosed on Lueras's home.

Another key point is the trial court sustained a demurrer without leave to amend to the First Amended Complaint—i.e., Lueras had filed only two complaints in a complicated and evolving area of law before facing dismissal. Given the standard of review and California's policy of liberality in granting of amendments, Lueras should be given an opportunity to amend the First Amended Complaint.

Allegations

In reviewing the order sustaining the demurrer, we accept the factual allegations of the First Amended Complaint as true. (Committee for Green Foothills v. Santa Clara County Bd. of Supervisors (2010) 48 Cal.4th 32, 42, 105 Cal.Rptr.3d 181, 224 P.3d 920.) We also accept as true facts appearing in exhibits attached to the complaint. (Sarale v. Pacific Gas & Electric Co. (2010) 189 Cal.App.4th 225, 245, 117 Cal.Rptr.3d 24; Dodd v. Citizens Bank of Costa Mesa (1990) 222 Cal.App.3d 1624, 1626–1627, 272 Cal.Rptr. 623.) If the facts expressly alleged in the complaint conflict with an exhibit, the contents of the exhibit take precedence. (Sarale v. Pacific Gas & Electric Co.,supra, at p. 245, 117 Cal.Rptr.3d 24.)

In March 2007, Lueras refinanced his home loan in the amount of $385,000. The monthly payment on the 30–year loan was $1,965.10. To secure the loan, a trust deed against Lueras's home was recorded.

Lueras made every monthly payment due until he and his wife suffered financial hardship. In 2009, Lueras requested a loan modification from the lender, Bank of America, under the Home Affordable Modification Program (HAMP).¹

In 2009, Fannie Mae instituted the HomeSaver Forbearance program, which was available to those who did not qualify for HAMP loan modifications. According to the First Amended Complaint, “[t]he program was supposed to lead to a permanent plan so that the borrower could ‘save’ their [ sic ] home and in the interim offer the owner a 6 month plan reducing the monthly payment by 30% to 50% less than the current mortgage payment.” Fannie Mae's Announcement 09–05R,² issued in April 2009, stated: “HomeSaver Forbearance is a new loss mitigation option available to borrowers [who] are either in default or for whom default is imminent and who do not qualify for the HAMP. A servicer should offer a HomeSaver Forbearance if such borrowers have a willingness and ability to make reduced monthly payments of at least one-half of their contractual monthly payment. The plan should reduce the borrower's payments to an amount the borrower can afford, but no less than 50 percent of the borrower's contractual monthly payment, including taxes and insurance and any other escrow items at the time the forbearance is implemented. During the six month period of forbearance, the servicer should work with the borrower to identify the feasibility of, and implement, a more permanent foreclosure prevention alternative. The servicer should evaluate and identify a permanent solution during the first three months of the forbearance period and should implement the alternative by the end of the sixth month.” (Announcement 09–05R, supra, at pp. 31–32 [as of Oct. 31, 2013].)

Although Lueras requested a HAMP loan modification, “Bank of America apparently offered [him] the Forbearance program instead of the HAMP program.” In a letter dated August 17, 2009, Bank of America notified Lueras that “you qualify for the Fannie Mae HomeSaver Forbearance program” and, as a consequence, he was eligible for reduced mortgage payments for a period of up to six months. The letter stated: “Under the HomeSaver Forbearance program, we are working with Fannie Mae, a government-sponsored enterprise, to reduce your mortgage payment by up to 50% for up to 6 months while we work with you to find a long-term solution.”

Lueras accepted Bank of America's offer for reduced monthly payments under the HomeSaver Forbearance program by entering into a forbearance agreement (the Forbearance Agreement), which was attached as an exhibit to the First Amended Complaint. The Forbearance Agreement reduced the monthly payments on Lueras's home loan to $1,101.16 for six months, commencing on September 16, 2009. The Forbearance Agreement stated the “Deferral Period Payment” commenced on September 16, 2009, and ended on the earliest of (1) six months from “the execution date by Servicer”; (2) “execution of an agreement with Servicer for another resolution of my default under my loan Documents ...”; or (3) “my default under the terms of this Agreement.” The Forbearance Agreement stated: “The Servicer will suspend any scheduled foreclosure sale, provided I continue to meet the obligations under this Agreement.”

The Forbearance Agreement also stated: “During the Deferral Period, Servicer will review my Loan to determine whether additional default resolution assistance can be offered to me. At the end of the Deferral Period either (1) I will be required to recommence my regularly scheduled payments and to make additional payment(s), on terms to be determined by Servicer, until all past due amounts owed under the Loan documents have been paid in full, (2) I will be required to reinstate my Loan in full, (3) Servicer will offer to modify my Loan[,] (4) Servicer will offer me some other form of payment assistance or alternative to foreclosure, on terms to be determined solely by Servicer ..., or (5) if no feasible alternative can be identified, Servicer may commence or continue foreclosure proceedings or exercise other rights and remedies provided Servicer under the Loan Documents.”

Lueras made the monthly payment of $1,101.16 for a period of 10 months. During that time, Bank of America did not work with Lueras to identify the feasibility of, much less implement, a more permanent foreclosure prevention alternative; Bank of America did not evaluate and identify a permanent solution during the first three months of the deferral period; and Bank of America did not implement a permanent solution by the end of the sixth-month period.

Meanwhile, Lueras submitted to Bank of America all information required to determine whether he qualified for a HAMP loan modification. In October 2010, while Lueras waited for Bank of America's determination, he was served with a notice of default by the trustee, ReconTrust. The notice of default stated the total amount in arrears was $64,424.98 as of October 19, 2010. It was not until this notice of default was recorded that Bank of America began to explore with Lueras alternatives to foreclosure. At that point, Lueras enlisted the aid of the California Attorney General's Office, which agreed to monitor and assist with the loan modification process on behalf of Lueras.

In December 2010, Lueras requested a loan modification package from Fannie Mae. In January 2011, Lueras returned the completed package to Fannie Mae, which sent a copy of it to Bank of America. The completed package included over 100 pages of documents from Lueras.

In February 2011, Lueras was served with a notice of trustee's sale with a scheduled sale date of February 22, 2011. Bank of America rescheduled the sale date a total of four times, ultimately setting the sale for May 18, 2011.

The First Amended Complaint alleged that Bank of America eventually determined Lueras was eligible for a HAMP loan modification and made an oral offer to modify the loan. Lueras accepted the offer. But, the First Amended Complaint also alleged that, in a letter dated May 5, 2011, Bank of America informed Lueras he was not eligible for a HAMP loan...