Justia Banking Opinion SummariesArticles Posted in California Courts of Appeal
Potocki v. Wells Fargo Bank, N.A.
Plaintiff-borrowers Thaddeus Potocki and Kelly Davenport sued Wells Fargo Bank, N.A. and several other defendants (collectively, “Wells Fargo”) arising out of plaintiffs’ attempts to get a loan modification. The trial court sustained Wells Fargo’s demurrer to the third amended complaint without leave to amend. On appeal, plaintiffs argued: (1) a forbearance agreement obligated Wells Fargo to modify their loan; (2) the trial court erred in finding Wells Fargo owed no duty of care; (3) Wells Fargo’s denial of a loan modification was not sufficiently detailed to satisfy Civil Code section 2923.61; and (4) a claim of intentional infliction of emotional distress was sufficiently pled. The Court of Appeal determined plaintiffs’ third contention had merit, and reversed judgment of dismissal, vacated the order sustaining the demurrer insofar as it dismissed the claim for a violation of section 2923.6, and remanded for further proceedings. View "Potocki v. Wells Fargo Bank, N.A." on Justia Law
Sheen v. Wells Fargo Bank, N.A.
Plaintiff filed suit against Wells Fargo in tort for negligent mortgage modification and other claims. The trial court sustained Wells Fargo's demurrer, partly because Wells Fargo did not owe plaintiff a duty in tort during contract negotiation.The Court of Appeal held that no tort duty exists during contract negotiations for mortgage modification. Therefore, the court affirmed the trial court's judgment, finding that the majority of other states are against it, and the most recent Restatement counsels against this extension because other bodies of law—breach of contract, negligent misrepresentation, promissory estoppel, fraud, and so forth—are better suited to handle contract negotiation issues. View "Sheen v. Wells Fargo Bank, N.A." on Justia Law
Taniguchi v. Restoration Homes, LLC
The Taniguchis obtained a $510,500 home loan, secured by a deed of trust. A 2009 loan modification reduced their monthly payments and deferred until the loan's maturity approximately $116,000 of indebtedness. The modification provided that failure to make modified payments as scheduled would be default so that the modification would be void at the lender’s option. The modification left unchanged the original acceleration clauses and power of sale. The Taniguchis defaulted on the modified loan and were informed that to avoid foreclosure, they would have to pay their four missed payments and associated late charges, foreclosure fees and costs, plus all sums deferred under the modification (about $120,000 in principal, interest and charges). The Taniguchis filed suit. Restoration recorded a notice of trustee’s sale. The Taniguchis obtained a temporary restraining order. The Taniguchis alleged violations of Civil Code section 2924c by demanding excessive amounts to reinstate the loan, unfair competition, breach of contract, and breach of the covenant of good faith and fair dealing. The trial court entered judgment in favor of Restoration. The court of appeal vacated in part. When principal comes due because of a default, section 2924c allows a borrower to cure that default and reinstate the loan by paying the default amount plus fees and expenses. Section 2924c gives the Taniguchis the opportunity to cure by paying the missed modified payments and avoid the demand for immediate payment of the deferred amounts. Nothing in the loan modification suggests that the Taniguchis forfeited that opportunity; section 2924c does not indicate that a forfeiture would be enforceable. View "Taniguchi v. Restoration Homes, LLC" on Justia Law
JPMorgan Chase Bank, N.A. v. Ward
Walter Ward took out a secured loan in 2007 without indicating whether he signed the deed of trust (DOT) conveying his property to the lender in his individual capacity or in his capacity as sole trustee of the trust in which his property was held. That DOT was never recorded. Years later, the lender's successor, JPMorgan Chase Bank, N.A. (Chase) asked for a replacement to foreclose. Walter refused, prompting Chase to sue. The trial court sustained two general demurrers to Chase's complaint, entered a judgment of dismissal, and awarded contractual attorney fees and costs to Walter's son, David Ward, the successor trustee of the trust that held the property. The issue this case presented for the Court of Appeal's review centered on whether Chase could reframe its action by amendment to omit a fatal allegation in its original complaint. Because the Court conclude it could, notwithstanding the sham pleading doctrine, the court should have granted leave to amend. Accordingly, we reverse the judgment and the postjudgment order and direct the court to enter a new order sustaining the general demurrers with leave to amend. View "JPMorgan Chase Bank, N.A. v. Ward" on Justia Law
City of Sierra Madre v. SunTrust Mortgage
The City brought an action against homeowners and their mortgage lender, SunTrust, and sought the appointment of a receiver to undertake the remediation of a public nuisance created by the homeowners on their residential property.Determining that the appeal was not moot, the Court of Appeal held that the trial court did not abuse its discretion in authorizing a super-priority lien to secure the loan taken by the receiver to fund remediation of the homeowners' property. In this case, because neither the homeowners nor SunTrust was willing to fund the costly remediation and the property did not produce any income, the receiver had to borrow money in order to proceed with the remediation. Because no lender would loan money to the receiver unless the loan was secured with a super-priority lien on the property, the only way to effect the remediation was to authorize the receiver's request to issue such a receiver's certificate. The court held that SunTrust's contention that it should remain the senior lienholder—and benefit from the increased property value provided by the remediation while bearing none of the cost—was simply untenable. View "City of Sierra Madre v. SunTrust Mortgage" on Justia Law
Schmidt v. Citibank, N.A.
Plaintiffs David and Hedda Schmidt appeal from a judgment entered in favor of defendants Citibank, N.A., as Trustee for Structured Asset Mortgage Investments II Trust 2007-AR3 Mortgage Pass Through Certificates Series 2007-AR3, and Select Portfolio Servicing, Inc. (defendants). In January 2007, the Schmidts obtained a $1,820,000 loan, secured by a residence at 2415 Rue Denise in La Jolla, California (the Property). The deed of trust was assigned to Citibank, N.A., as Trustee for Structured Asset Mortgage Investments II Trust 2007-AR3 Mortgage Pass Through Certificates Series 2007-AR3. The Schmidts defaulted on the loan and entered into a loan modification agreement in February 2013 with their loan servicer at the time, JPMorgan Chase Bank. Within approximately seven months, the Schmidts defaulted on the loan modification agreement. The Schmidts would apply for and be denied loan modification every year from 2013 to 2017. They sued defendants, alleging violations of the Homeowners' Bill of Rights and Business and Professions Code section 17200, seeking to prevent the completion of a trustee's sale of their residence. The defendants moved for summary judgment and presented evidence of extensive and numerous telephone calls between the Schmidts and Select Portfolio Servicing, Inc., the loan servicer, during which the Schmidts' financial situation was discussed, as were possible options to avoid foreclosure. The trial court granted the defendants' motion for summary judgment and entered judgment in their favor. On appeal, the Schmidts contended summary judgment should not have been granted because there remained triable issues of fact to be determined. The Court of Appeal disagreed and affirmed the judgment. View "Schmidt v. Citibank, N.A." on Justia Law
Chacker v. JPMorgan Chase Bank, N.A.
After plaintiff's foreclosure action was dismissed, the trial court ordered plaintiff to pay attorney fees to defendants, finding certain provisions in the deed of trust she signed authorized the fee award. In the published portion of the opinion, the Court of Appeal held that the deed of trust authorized the addition of attorney fees to the loan amount, not a separate award to pay fees. The court also held that the Rosenthal Fair Debt Collections Practices Act provided no independent basis for ordering plaintiff to pay attorney fees. Accordingly, the trial court's order compelling plaintiff to pay attorney fees was reversed and the matter remanded. View "Chacker v. JPMorgan Chase Bank, N.A." on Justia Law
Hacker v. Homeward Residential, Inc.
The successor trustee to the 1713 Stearns LaVerne Family Trust (Stearns), filed suit against numerous defendants for claims arising from an allegedly void assignment of the deed of trust (DOT) on real property located at 1713-1717 Stearns Drive in Los Angeles, California (the property), and a failed short sale agreement. The trial court sustained the demurrer as to some defendants and denied the trustee's request for leave to amend.The Court of Appeal reversed and held that the trial court abused its discretion in denying leave to amend. The court held that the trial court properly sustained the demurrers to all causes of action; but that the trial court abused its discretion in denying leave to amend because the trustee was the owner of the property and had proposed facts that, if true, were sufficient to establish that the August 21, 2008 assignment was void. Accordingly, the trial court was directed to grant the trustee leave to amend the complaint. View "Hacker v. Homeward Residential, Inc." on Justia Law
Lafferty v. Wells Fargo Bank, N.A.
This is the third appeal that comes to us in this case, which arises out of Patrick and Mary Lafferty’s purchase of a defective motor home from Geweke Auto & RV Group (Geweke) with an installment loan funded by Wells Fargo Bank, N.A. In Lafferty v. Wells Fargo Bank, 213 Cal.App.4th 545 (2013: "Lafferty I"), the Court of Appeal affirmed in part and reversed in part the action brought by the Laffertys against Wells Fargo. Lafferty I awarded costs on appeal to the Laffertys. On remand, the Laffertys moved for costs and attorney fees. The trial court granted costs in part but denied the Laffertys’ request for attorney fees as premature because some causes of action remained to be tried. The Laffertys appealed. In "Lafferty II," the Court of Appeal held the award of costs on appeal did not include an award of attorney fees. Lafferty II also held the Laffertys’ request for attorney fees was prematurely filed. After issuance of the remittitur in Lafferty II, the parties stipulated to a judgment that contained two key components: (1) their agreement the Laffertys had paid $68,000 to Wells Fargo under the loan for the motor home; and (2) Wells Fargo repaid $68,000 to the Laffertys. After entry of the stipulated judgment, the trial court awarded the Laffertys $40,596.93 in prejudgment interest and $8,384.33 in costs. The trial court denied the Laffertys’ motion for $1,980,070 in post-trial attorney fees, $464,220 in post-appeal attorney fees, and $16,816.15 in non-statutory costs. Wells Fargo appealed the award of prejudgment interest and costs, and the Laffertys cross-appealed the denial of their requests for attorney fees and nonstatutory costs. The Court of Appeal concluded resolution of this appeal and cross-appeal turned on the meaning of title 16, section 433.2 of the Code of Federal Regulations, or the "Holder Rule." The Court found the Laffertys were limited under the plain meaning of the Holder Rule to recovering no more than the $68,000 they paid under terms of the loan with Wells Fargo. Consequently, the trial court properly denied the Laffertys’ request for attorney fees and nonstatutory costs in excess of their recovery of the amount they actually paid under the loan to Wells Fargo. In holding the Laffertys were limited in their recovery against Wells Fargo, the Court of Appeal rejected the Laffertys’ claims the Holder Rule violated the First Amendment, due process, or equal protection guarantees of the federal Constitution. However, the Court concluded the trial court did not err in awarding costs of suit and prejudgment interest to the Laffertys. View "Lafferty v. Wells Fargo Bank, N.A." on Justia Law
Placer Foreclosure, Inc. v. Aflalo
After defendant filed a wrongful foreclosure action against the trustee of a foreclosure sale (Placer) and the third-party buyer, Pro Value, Placer filed a complaint in interpleader and deposited the surplus proceeds from a foreclosure sale with the court. The Court of Appeal affirmed the trial court's judgment of dismissal after the trial court sustained defendant's demurrer to the interpleader complaint without leave to amend. The court held that Placer was statutorily required under Civil Code section section 2924k to disburse surplus funds to defendant, and that Placer could safely distribute the surplus funds to defendant without any risk of multiple liability. The court remanded with directions to release the interpleaded funds to defendant. View "Placer Foreclosure, Inc. v. Aflalo" on Justia Law