Orcilla v. Big Sur, Inc.

244 Cal.App.4th 982

198 Cal.Rptr.3d 715

Virgilio ORCILLA et al., Plaintiffs and Appellants,

v.BIG SUR, INC., et al., Defendants and Respondents.

H040021

Court of Appeal, Sixth District, California.

Filed February 11, 2016

As Modified March 11, 2016

Counsel for Plaintiffs/Appellants Virgilio and Theodora Orcilla: In pro. per.

Counsel for Defendant/Respondent Big Sur, Inc.: Law Offices of Peter N. Brewer, Julia Ming Hua Wei, Palo Alto.

Counsel for Defendants/Respondents Bank of America, N.A., ReconTrust Company, N.A., Mortgage Electronic Registration Systems, Inc.: Bryan Cave, Andrea M. Hicks, San Francisco, Margaret K. Thies.

Premo, J.Plaintiffs Virgilio and Teodora Orcilla lost their San Jose home (the Property) through a nonjudicial foreclosure sale in May 2010. The Property was purchased by a third party, defendant Big Sur, Inc. (Big Sur). The Orcillas vacated the Property after Big Sur obtained a judgment against them in an unlawful detainer action. Thereafter, the Orcillas sued Big Sur and the parties involved in the nonjudicial foreclosure sale, Bank of America, N.A. (BofA); ReconTrust Company, N.A. (ReconTrust); and Mortgage Electronic Registration Systems, Inc. (MERS) (collectively, the Bank Defendants), to set aside the trustee's sale.

Big Sur and the Bank Defendants successfully demurred to the operative second amended complaint. The Orcillas, proceeding in propria persona, appeal from a judgment entered in favor of defendants. We reverse and remand with instructions.

I. FACTUAL BACKGROUND

The Orcillas are Filipino and English is their second language. Virgilio is unable to work due to a 2004 medical diagnosis.¹ In 2006, Teodora contacted Quick Loan Funding, Inc. (Quick Loan) about refinancing the Property. She did so in response to marketing materials she had received from the company. After speaking with a Quick Loan agent, Teodora applied to refinance the Property for $525,000. At the Quick Loan agent's recommendation, Teodora did not include Virgilio on the loan application. Teodora told the agent she could not afford the loan modification because the monthly payments would be more than her monthly income, but she eventually accepted the agent's false representation that she could afford the loan modification.

On May 9, 2006, Teodora obtained a $525,000 real property loan from Quick Loan. She alone executed an adjustable rate note (the Note), in which she promised to repay the loan at an initial interest rate of 8.99 percent. The Note provided that the interest rate would be variable after two years and would never exceed 14.99 percent. The Note further provided that Teodora's initial monthly payments would be in the amount of $4,220.49. (In 2005 and 2006, Teodora's monthly income was less than $3,000 and Virgilio did not work.)

The Note was secured by a deed of trust (the Deed of Trust) on the Property. The Deed of Trust, which was signed jointly by the Orcillas, named MERS as the beneficiary and LandAmerica Commonwealth as the trustee.

ReconTrust, as trustee of the Deed of Trust, recorded a Notice of Default and Election to Sell Under Deed of Trust (First Notice of Default) on February 2, 2007. The First Notice of Default reflected an arrearage of $16,668. ReconTrust rescinded the Notice of Default on May 15, 2007.

On April 18, 2008, ReconTrust recorded a Second Notice of Default (Second Notice of Default), which reflected an arrearage of $32,048. The Second Notice of Default was signed by Anselmo Pagkaliwangan. On March 28, 2013, Teodora contacted ReconTrust. The representatives with whom Teodora spoke could not confirm whether Anselmo Pagkaliwangan had ever worked for ReconTrust. The Orcillas allege that forensic loan audits and lawsuits indicate Anselmo Pagkaliwangan also signed documents for various other entities, including LSI Title Company and Washington Mutual, N.A. Based on the foregoing, the Orcillas allege the Second Notice of Default was "stamped/robo-signed."

By letter dated August 15, 2008, Countrywide Home Loans (Countrywide) advised Teodora that her loan modification had been approved. The letter advised that Teodora's modified principal loan balance was $570,992.60 and that, effective September 1, 2008, her monthly loan payment would be $4,627.47. The letter stated "[t]his [a]greement will bring your loan current" and requested that Teodora sign, date, and return one copy of the enclosed loan modification agreement to Countrywide by September 14, 2008. The letter further provided "[t]his Letter does not stop, waive or postpone the collection actions, or credit reporting actions we have taken or contemplate taking against you and the property. In the event that you do not or cannot fulfill ALL of the terms and conditions of this letter no later than September 14, 2008, we will continue our collections actions without giving you additional notices or response periods." Teodora signed the enclosed loan modification agreement on September 11, 2008. The loan modification agreement provided for a five-year fixed interest rate of 8.99 percent followed by a variable interest rate. The Orcillas allege that BofA employees represented in August 2008 that the loan modification would result in a "new loan." They further allege that defendants admitted in a separate legal action in federal court that the loan modification "added Plaintiffs' previously unpaid balances to a new loan."

On April 23, 2010, ReconTrust sent a notice of trustee's sale to the Orcillas that listed the sale date as May 18, 2010. Also on April 23, 2010, a substitution of trustee, in which MERS substituted ReconTrust as trustee under the Deed of Trust, was sent to the former trustee. On May 3, 2010, ReconTrust recorded a notice of trustee's sale listing the sale date as May 24, 2010.²

On May 12, 2010, the Orcillas submitted a HAMP³ loan modification application to BofA with the assistance of a nonprofit, California Community Transitional Housing, Inc. Attached to the second amended complaint is the declaration of Nicholas Agbabiaka, the California Community Transitional Housing, Inc. employee who assisted the Orcillas. Agbabiaka declared "I sent the ... HAMP package ... to Bank of America. I also contacted Bank of America letting them know that the Orcillas ... wanted to pursue a HAMP modification.... Bank of America stated that it had received and was reviewing the Orcillas' HAMP application. Bank of America also stated that it would send a packet for the Orcillas to complete and that a Trustee's Sale scheduled for May 24, 2010 would not proceed." Agbabiaka passed that information along to Teodora.

However, the trustee's sale did proceed. On May 24, 2010, the Bank Defendants sold the Property to Big Sur at a public auction for $495,500. ReconTrust recorded a Trustee's Deed Upon Sale stating that the amount of unpaid debt was $688,871.94. The Trustee's Deed further stated that "[a]ll requirements of law regarding the recording and mailing of copies of the Notice of Default and Election to Sell, and the recording, mailing, posting, and publication of the Notice of Trustee's Sale have been complied with."

Following the trustee's sale, BofA informed Agbabiaka that it never received the Orcillas' HAMP loan modification application. That application was never granted nor denied.

Big Sur filed an unlawful detainer action against the Orcillas and obtained a judgment against them. The Orcillas and their three minor grandchildren were forced to vacate the Property.

The California Department of Corporations revoked Quick Loan's lending license on May 27, 2008, having found Quick Loan had pledged trust funds to obtain gambling markers from Las Vegas casinos and was charging borrowers unauthorized fees. The Orcillas allege Quick Loan never sold or assigned the Note or its interest in the Deed of Trust.

II. PROCEDURAL BACKGROUND

The Orcillas filed suit against Big Sur and the Bank Defendants on May 24, 2012. Defendants successfully demurred to the Orcillas' initial complaint and first amended complaint, but the Orcillas were granted leave to amend those pleadings. The operative second amended complaint, filed on April 2, 2013, asserts 13 causes of action: wrongful foreclosure; violation of Civil Code section 2924 ;⁴ violation of section 2924b; violation of section 2924c; violation of section 2924f; violation of section 2932.5; breach of contract; fraud; breach of oral contract; promissory estoppel; quiet title; unlawful business practices in violation the unfair business competition law (UCL) of Business and Professions Code section 17200 et seq. ; and declaratory relief.

Each cause of action is largely based on the following allegations: the original loan and the loan modification were unconscionable and unenforceable; no valid notice of default was issued prior to the trustee's sale because the loan modification cured the second Notice of Default; the trustee's sale was fraudulent because the Notice of Trustee's Sale set forth an incorrect date of sale; the Bank Defendants lacked the authority to foreclose on the Property because the Deed of Trust never was assigned to them; the Bank Defendants lacked the authority to foreclose on the Property because the Deed of Trust was invalid, having been bifurcated from the Note; and the Bank Defendants improperly proceeded with the trustee's sale after promising to postpone it. Big Sur and the Bank Defendants successfully demurred. The trial court sustained defendants' demurrers without leave to amend as to all causes of action except the promissory estoppel claim against the Bank Defendants, for which leave to amend was granted.

After the Orcillas failed to file a third amended complaint within the leave period, the Bank Defendants moved to dismiss the action. The court granted that motion and entered judgment in favor of defendants. The Orcillas timely appealed.⁵

III. DISCUSSION

A. Standard of Review

We review an order sustaining a demurrer de novo, exercising our independent judgment as to whether a cause of...