CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION ONE

APPEAL from an order and a judgment of the Superior Court of Los Angeles County, Michael L. Stern, Judge.  Affirmed in part and reversed in part.

Dennis Moore; Nick A. Alden for Plaintiff and Appellant.

Brooks Bauer, Michael R. Brooks and Bruce T. Bauer for Defendant and Respondent.

___________________________________________

As alleged in this case, plaintiff, a married woman, obtained an adjustable rate loan from a bank to purchase real property secured by a deed of trust on her residence.  About two years into the loan, she could not afford the monthly payments and filed for bankruptcy under chapter 7 of the Bankruptcy Code (11 U.S.C. §§ 701–784).  She intended to convert the chapter 7 proceeding to a chapter 13 proceeding (11 U.S.C. §§ 1301–1330) and to enlist the financial assistance of her husband to reinstate the loan, pay the arrearages, and resume the regular loan payments.

Plaintiff contacted the bank, which promised to work with her on a loan reinstatement and modification if she would forgo further bankruptcy proceedings.  In reliance on that promise, plaintiff did not convert her bankruptcy case to a chapter 13 proceeding or oppose the bank’s motion to lift the bankruptcy stay.  While the bank was promising to work with plaintiff, it was simultaneously complying with the notice requirements to conduct a sale under the power of sale in the deed of trust, commonly referred to as a nonjudicial foreclosure or foreclosure.  (See Civ. Code, §§ 2924, 2924a–2924k.)

The bankruptcy court lifted the stay.  But the bank did not work with plaintiff in an attempt to reinstate and modify the loan.  Rather, it completed the foreclosure.

Plaintiff filed this action against the bank, alleging a cause of action for promissory estoppel, among others.  She argued the bank’s promise to work with her in reinstating and modifying the loan was enforceable, she had relied on the promise by forgoing bankruptcy protection under chapter 13, and the bank subsequently breached its promise by foreclosing.  The trial court dismissed the case on demurrer.

We conclude (1) plaintiff could have reasonably relied on the bank’s promise to work on a loan reinstatement and modification if she did not seek relief under chapter 13, (2) the promise was sufficiently concrete to be enforceable, and (3) plaintiff’s decision to forgo chapter 13 relief was detrimental because it allowed the bank to foreclose on the property.  Contrary to the bank’s contention that plaintiff’s use of the Bankruptcy Code was ipso facto bad faith, chapter 13 is “‘uniquely tailored to protect homeowners’ primary residences [from foreclosure].’”  (In re Willette (Bankr. D.Vt. 2008) 395 B.R. 308, 322.)

I

BACKGROUND

The facts of this case are taken from the allegations of the operative complaint, which we accept as true.  (See Hensler v. City of Glendale (1994) 8 Cal.4th 1, 8, fn. 3.)

A.        Complaint

This action was filed on April 1, 2009.  Two months later, a first amended complaint was filed.  On August 17, 2009, after the sustaining of a demurrer, a second amended complaint (complaint) was filed.  The complaint alleged as follows.

Plaintiff Claudia Aceves, an unmarried woman, obtained a loan from Option One Mortgage Corporation (Option One) on April 20, 2006.  The loan was evidenced by a note secured by a deed of trust on Aceves’s residence.  Aceves borrowed $845,000 at an initial rate of 6.35 percent.  After two years, the rate became adjustable.  The term of the loan was 30 years.  Aceves’s initial monthly payments were $4,857.09.

On March 25, 2008, Option One transferred its entire interest under the deed of trust to defendant U.S. Bank, National Association, as the “Trustee for the Certificateholders of Asset Backed Securities Corporation Home Equity Loan Trust, Series OOMC 2006-HE5” (U.S. Bank).  The transfer was effected through an “Assignment of Deed of Trust.”  U.S. Bank therefore became Option One’s assignee and the beneficiary of the deed of trust.  Also on March 25, 2008, U.S. Bank, by way of a “Substitution of Trustee,” designated Quality Loan Service Corporation (Quality Loan Service) as the trustee under the deed of trust.  The Substitution of Trustee was signed by the bank’s attorney-in-fact.

In January 2008, Aceves could no longer afford the monthly payments on the loan.  On March 26, 2008, Quality Loan Service recorded a “Notice of Default and Election to Sell Under Deed of Trust.”  (See Civ. Code, § 2924.)  Shortly thereafter, Aceves filed for bankruptcy protection under chapter 7 of the Bankruptcy Code (11 U.S.C. §§ 701–784), imposing an automatic stay on the foreclosure proceedings (see 11 U.S.C. § 362(a)).  Aceves contacted U.S. Bank and was told that, once her loan was out of bankruptcy, the bank “would work with her on a mortgage reinstatement and loan modification.”  She was asked to submit documents to U.S. Bank for its consideration.

Aceves intended to convert her chapter 7 bankruptcy case to a chapter 13 case (see 11 U.S.C. §§ 1301–1330) and to rely on the financial resources of her husband “to save her home” under chapter 13.  In general, chapter 7, entitled “Liquidation,” permits a debtor to discharge unpaid debts, but a debtor who discharges an unpaid home loan cannot keep the home; chapter 13, entitled “Adjustment of Debts of an Individual with Regular Income,” allows a homeowner in default to reinstate the original loan payments, pay the arrearages over time, avoid foreclosure, and retain the home.  (See 1 Collier on Bankruptcy (16th ed. 2010) ¶¶ 1.07[1][a] to 1.07[1][g], 1.07[5][a] to 1.07[5][e], pp. 1?25 to 1?30, 1?43 to 1?45.)

U.S. Bank filed a motion in the bankruptcy court to lift the stay so it could proceed with a nonjudicial foreclosure.

On or about November 12, 2008, Aceves’s bankruptcy attorney received a letter from counsel for the company servicing the loan, American Home Mortgage Servicing, Inc. (American Home).  The letter requested that Aceves’s attorney agree in writing to allow American Home to contact Aceves directly to “explore Loss Mitigation possibilities.”  Thereafter, Aceves contacted American Home’s counsel and was told they could not speak to her before the motion to lift the bankruptcy stay had been granted.

In reliance on U.S. Bank’s promise to work with her to reinstate and modify the loan, Aceves did not oppose the motion to lift the bankruptcy stay and decided not to seek bankruptcy relief under chapter 13.  On December 4, 2008, the bankruptcy court lifted the stay.  On December 9, 2008, although neither U.S. Bank nor American Home had contacted Aceves to discuss the reinstatement and modification of the loan, U.S. Bank scheduled Aceves’s home for public auction on January 9, 2009.

On December 10, 2008, Aceves sent documents to American Home related to reinstating and modifying the loan.  On December 23, 2008, American Home informed Aceves that a “negotiator” would contact her on or before January 13, 2009 — four days after the auction of her residence.  On December 29, 2008, Aceves received a telephone call from “Samantha,” a negotiator from American Home.  Samantha said to forget about any assistance in avoiding foreclosure because the “file” had been “discharged” in bankruptcy.  On January 2, 2009, Samantha contacted Aceves again, saying that American Home had mistakenly decided not to offer her any assistance:  American Home incorrectly thought Aceves’s loan had been discharged in bankruptcy; instead, Aceves had merely filed for bankruptcy.  Samantha said that, as a result of American Home’s mistake, it would reconsider a loss mitigation proposal.  On January 8, 2009, the day before the auction, Samantha called Aceves’s bankruptcy attorney and stated that the new balance on the loan was $965,926.22; the new monthly payment would be more than $7,200; and a $6,500 deposit was due immediately via Western Union.  Samantha refused to put any of those terms in writing.  Aceves did not accept the offer.

On January 9, 2009, Aceves’s home was sold at a trustee’s sale to U.S. Bank.  On February 11, 2009, U.S. Bank served Aceves with a three-day notice to vacate the premises and, a month later, filed an unlawful detainer action against her and her husband (U.S. Bank, N.A. v. Aceves (Super. Ct. L.A. County, 2009, No. 09H00857)).  Apparently, Aceves and her husband vacated the premises during the eviction proceedings.

U.S. Bank never intended to work with Aceves to reinstate and modify the loan.  The bank so promised only to convince Aceves to forgo further bankruptcy proceedings, thereby permitting the bank to lift the automatic stay and foreclose on the property.

The complaint alleged causes of action against U.S. Bank for quiet title, slander of title, fraud, promissory estoppel, and declaratory relief.  It also sought to set aside the trustee’s sale and to void the trustee’s deed upon the sale of the home.

B.        Demurrer

U.S. Bank filed a demurrer separately attacking each cause of action and the requested remedies.  Aceves filed opposition.

At the hearing on the demurrer, Aceves’s attorney argued that Aceves and her husband “could have saved their house through bankruptcy,” but “due to the promises of the bank, they didn’t go those routes to save their house.  [¶] . . . [¶] . . . [T]hat’s the whole essence of promissory estoppel.  [¶] . . . [¶]  Prior to [American Home’s November 12, 2008] letter, there’s numerous phone contacts and conversations with [American Home], which was the agent for U.S. Bank, regarding, ‘Yes, once we get leave, we will work with you, . . . and they did not work with her at all.’”  The trial court replied:  “The foreclosure took place.  There’s no promissory fraud or anything that deluded [Aceves] under the circumstances.”

On October 29, 2009, the trial court entered an order sustaining the demurrer without leave to amend and a judgment in favor of U.S. Bank.  Aceves filed this appeal.

II

DISCUSSION

Aceves focuses primarily on her claim for promissory estoppel, arguing it is adequately pleaded.  She also contends her other claims should have survived the demurrer.  U.S. Bank counters that the trial court properly dismissed the case.

We conclude Aceves stated a claim for promissory estoppel.  As alleged, in reliance on a promise by U.S. Bank to work with her in reinstating and modifying the loan, Aceves did not attempt to save her home under chapter 13.  Yet U.S. Bank then went forward with the foreclosure and did not commence negotiations toward a possible loan solution.  As demonstrated in its brief on appeal, U.S. Bank fails to appreciate that chapter 13 may be used legitimately to assist a borrower in reinstating a home loan and avoiding foreclosure after a default.

All but one of Aceves’s remaining claims were properly dismissed.  She adequately pleaded a claim for fraud.  But the record does not support her other claims or requests for relief:  The complaint does not allege any irregularities in the foreclosure process that would permit the trial court to void the deed of sale or otherwise invalidate the foreclosure.

A.        Promissory Estoppel

“‘The elements of a promissory estoppel claim are “(1) a promise clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3) [the] reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by his reliance.” . . .’”  (Advanced Choices, Inc. v. State Dept. of Health Services (2010) 182 Cal.App.4th 1661, 1672.)

1.  Clear and Unambiguous Promise

“‘[A] promise is an indispensable element of the doctrine of promissory estoppel.  The cases are uniform in holding that this doctrine cannot be invoked and must be held inapplicable in the absence of a showing that a promise had been made upon which the complaining party relied to his prejudice . . . .’ . . . The promise must, in addition, be ‘clear and unambiguous in its terms.’”  (Garcia v. World Savings, FSB (2010) 183 Cal.App.4th 1031, 1044, citation omitted.)  “To be enforceable, a promise need only be ‘“definite enough that a court can determine the scope of the duty[,] and the limits of performance must be sufficiently defined to provide a rational basis for the assessment of damages.”’ . . . It is only where ‘“a supposed ‘contract’ does not provide a basis for determining what obligations the parties have agreed to, and hence does not make possible a determination of whether those agreed obligations have been breached, [that] there is no contract.”’”  (Id. at p. 1045, citation omitted.)  “[T]hat a promise is conditional does not render it unenforceable or ambiguous.”  (Ibid.)

U.S. Bank agreed to “work with [Aceves] on a mortgage reinstatement and loan modification” if she no longer pursued relief in the bankruptcy court.  This is a clear and unambiguous promise.  It indicates that U.S. Bank would not foreclose on Aceves’s home without first engaging in negotiations with her to reinstate and modify the loan on mutually agreeable terms.

U.S. Bank’s discussion of Laks v. Coast Fed. Sav. & Loan Assn. (1976) 60 Cal.App.3d 885 misses the mark.  There, the plaintiffs applied for a loan and relied on promissory estoppel in arguing that the lender was bound to make the loan.  The Court of Appeal affirmed the dismissal of the case on demurrer, explaining that the alleged promise to make a loan was unclear and ambiguous because it did not include all of the essential terms of a loan, including the identity of the borrower and the security for the loan.  In contrast, Aceves contends U.S. Bank promised but failed to engage in negotiations toward a solution of her loan problems.  Thus, the question here is simply whether U.S. Bank made and kept a promise to negotiate with Aceves, not whether, as in Laks, the bank promised to make a loan or, more precisely, to modify a loan.  Aceves does not, and could not, assert she relied on the terms of a modified loan agreement in forgoing bankruptcy relief.  She acknowledges that the parties never got that far because U.S. Bank broke its promise to negotiate with her in an attempt to reach a mutually agreeable modification.  While Laks turned on the sufficiency of the terms of a loan, Aceves’s claim rests on whether U.S. Bank engaged in the promised negotiations.  The bank either did or did not negotiate.

Further, U.S. Bank asserts that it offered Aceves a loan modification, referring to the offer it made the day before the auction.  That assertion, however, is of no avail.  Aceves’s promissory estoppel claim is not based on a promise to make a unilateral offer but on a promise to negotiate in an attempt to reach a mutually agreeable loan modification.  And, even assuming this case involved a mere promise to make a unilateral offer, we cannot say the bank’s offer satisfied such a promise in light of the offer’s terms and the circumstances under which it was made.

2.  Reliance on the Promise

Aceves relied on U.S. Bank’s promise by declining to convert her chapter 7 bankruptcy proceeding to a chapter 13 proceeding, by not relying on her husband’s financial assistance in developing a chapter 13 plan, and by not opposing U.S. Bank’s motion to lift the bankruptcy stay.

3.  Reasonable and Foreseeable Reliance

“‘Promissory estoppel applies whenever a “promise which the promissor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance” would result in an “injustice” if the promise were not enforced. . . .’”  (Advanced Choices, Inc. v. State Dept. of Health Services, supra, 182 Cal.App.4th at pp. 1671–1672, citation omitted, italics added.)

“[A] party plaintiff’s misguided belief or guileless action in relying on a statement on which no reasonable person would rely is not justifiable reliance. . . . ‘If the conduct of the plaintiff in the light of his own intelligence and information was manifestly unreasonable, . . . he will be denied a recovery.’”  (Kruse v. Bank of America (1988) 202 Cal.App.3d 38, 54, citation omitted.)  A mere “hopeful expectation[] cannot be equated with the necessary justifiable reliance.”  (Id. at p. 55.)

We conclude Aceves reasonably relied on U.S. Bank’s promise; U.S. Bank reasonably expected her to so rely; and it was foreseeable she would do so.  U.S. Bank promised to work with Aceves to reinstate and modify the loan.  That would have been more beneficial to Aceves than the relief she could have obtained under chapter 13.  The bankruptcy court could have reinstated the loan — permitted Aceves to cure the default, pay the arrearages, and resume regular loan payments — but it could not have modified the terms of the loan, for example, by reducing the amount of the regular monthly payments or extending the life of the loan.  (See 11 U.S.C. § 1322(b)(2), (3), (5), (c)(1); 8 Collier on Bankruptcy, supra, ¶¶ 1322.06[1], 1322.07[2], 1322.09[1]–[6], 1322.16 & fn. 5, pp. 23–24, 31–32, 34–42, 55–56.)  By promising to work with Aceves to modify the loan in addition to reinstating it, U.S. Bank presented Aceves with a compelling reason to opt for negotiations with the bank instead of seeking bankruptcy relief.  (See Garcia v. World Savings, FSB, supra, 183 Cal.App.4th at pp. 1041–1042 [discussing justifiable reliance].)

We emphasize that this case involves a long-term loan secured by a deed of trust, one in which the last payment under the loan schedule would be due after the final payment under a bankruptcy plan.  (See 11 U.S.C. § 1322(b)(5).)  Aceves had more than 28 years left on the loan, and a bankruptcy plan could not have exceeded five years.  In contrast, if a case involves a short-term loan, where the last payment under the original loan schedule is due before the final payment under the bankruptcy plan, the bankruptcy court has the authority to modify the terms of the loan.  (See 11 U.S.C. § 1322(c)(2); In re Paschen (11th Cir. 2002) 296 F.3d 1203, 1205–1209; 8 Collier on Bankruptcy, supra, ¶ 1322.17, pp. 57–58; March et al., Cal. Practice Guide: Bankruptcy (The Rutter Group 2010) ¶ 13:396, p. 13?45; compare id. ¶¶ 13:385 to 13:419, pp. 13?42 to 13?48 [discussing short-term debts] with id. ¶¶ 13:440 to 13:484, pp. 13?49 to 13?54 [discussing long-term debts].)  The modification of a short-term loan may include “lienstripping,” that is, the bifurcation of the loan into secured and unsecured components based on the value of the home, with the unsecured component subject to a “cramdown.”  (See In re Paschen, supra, 296 F.3d at pp. 1205–1209; 8 Collier on Bankruptcy, supra, ¶ 1322.17, pp. 57–58; see also March et al., Cal. Practice Guide: Bankruptcy, supra, ¶¶ 13:370 to 13:371.1, p. 13?41 [discussing lienstripping].)  If a lien is “stripped down,” the lender is “only assured of receiving full [payment] for the secured portion of the [bankruptcy] claim.”  (In re Paschen, supra, 296 F.3d at p. 1206.)

4.  Detriment

U.S. Bank makes no attempt to hide its disdain for the protections offered homeowners by chapter 13, referring disparagingly to Aceves’s bankruptcy case as “bad faith.”  But “Chapter 13’s greatest significance for debtors is its use as a weapon to avoid foreclosure on their homes.  Restricting initial . . . access to Chapter 13 protection will increase foreclosure rates for financially distressed homeowners.  Loss of homes hurts not only the individual homeowner but also the family, the neighborhood and the community at large.  Preserving access to Chapter 13 will reduce this harm.

“Chapter 13 bankruptcies do not result in destruction of the interests of traditional mortgage lenders.  Under Chapter 13, a debtor cannot discharge a mortgage debt and keep her home.  Rather, a Chapter 13 bankruptcy offers the debtor an opportunity to cure a mortgage delinquency over time — in essence it is a statutorily mandated payment plan — but one that requires the debtor to pay precisely the amount she would have to pay to the lender outside of bankruptcy.  Under Chapter 13, the plan must provide the amount necessary to cure the mortgage default, which includes the fees and costs allowed by the mortgage agreement and by state law.  Mortgage lenders who are secured only by an interest in the debtor’s residence enjoy even greater protection under 11 U.S.C. § 1322(b)(2) . . . . Known as the ‘anti-modification provision,’ [section] 1322(b)(2) bars a debtor from modifying any rights of such a lender — including the payment schedule provided for under the loan contract. . . . [Cf. 11 U.S.C. § 1322(c)(2) [bankruptcy court has authority to modify rights of lender, including payment schedule, in cases involving short-term mortgages]; see pt. II.A.3, ante.]

“Even though a debtor must, through reinstatement of her delinquent mortgage by a Chapter 13 repayment plan . . . , pay her full obligation to the lender, Chapter 13 remains the only viable way for most mortgage debtors to cure defaults and save their homes.  Mortgage lenders are extraordinarily unwilling to accept repayment schedules outside of bankruptcy. . . . There is no history to support any claim that lenders will accommodate the need for extended workouts without the pressure of bankruptcy as an option for consumer debtors.  Reducing the availability of [C]hapter 13 protection to mortgage debtors is most likely to result in higher foreclosure rates, not in greater flexibility by lenders.”  (DeJarnatt, Once Is Not Enough: Preserving Consumers’ Rights To Bankruptcy Protection (Spring 1999) Ind. L.J. 455, 495–496, fn. omitted.)

“It is unrealistic to think mortgage companies will do workouts without the threat of the debtor’s access to Chapter 13 protection.  The bankruptcy process is still very protective of the mortgage industry.  To the extent that the existence of Chapter 13 protections increases the costs of mortgage financing to all consumers, it can and should be viewed as an essential form of consumer insurance . . . .”  (DeJarnatt, Once Is Not Enough:  Preserving Consumers’ Rights To Bankruptcy Protection, supra, Ind. L.J. at p. 499, fn. omitted.)

We mention just a few of the rights Aceves sacrificed by deciding to forgo a chapter 13 proceeding.  First, although Aceves initially filed a chapter 7 proceeding, “a chapter 7 debtor may convert to a case[] under chapter []13 at any time without court approval, so long as the debtor is eligible for relief under the new chapter.”  (1 Collier on Bankruptcy, supra, ¶ 1.06, p. 24, italics added; accord, March et al., Cal. Practice Guide: Bankruptcy, supra, ¶¶ 5:1700 to 5:1701, 5:1715 to 5:1731, pp. 5(II)?1, 5(II)?3 to 5(II)?5; see 11 U.S.C. § 706(a).)  In addition, Aceves could have “cured” the default, reinstating the loan to predefault conditions.  (See In re Frazer (Bankr. 9th Cir. 2007) 377 B.R. 621, 628; In re Taddeo (2d Cir. 1982) 685 F.2d 24, 26–28; 11 U.S.C. § 1322(b)(5); March et al., Cal. Practice Guide: Bankruptcy, supra, ¶ 13:450, p. 13?50.)  She also would have had a “reasonable time” — a maximum of five years — to make up the arrearages.  (See 11 U.S.C. § 1322(b)(5), (d); 8 Collier on Bankruptcy, supra, ¶ 1322.09[5], pp. 39–40; March et al., Cal. Practice Guide: Bankruptcy, supra, ¶ 13:443, p. 13?49.)  And, by complying with a bankruptcy plan, Aceves could have prevented U.S. Bank from foreclosing on the property.  (See 8 Collier on Bankruptcy, supra, ¶¶ 1322.09[1] to 1322.09[3], 1322.16, pp. 34–37, 55–56.)  “‘“Indeed, the bottom line of most Chapter 13 cases is to preserve and avoid foreclosure of the family house.”’”  (In re King (Bankr. N.D.Fla. 1991) 131 B.R. 207, 211; see also March et al., Cal. Practice Guide: Bankruptcy, supra, ¶¶ 8:1050, 8:1375 to 8:1411, pp. 8(II)?1, 8(II)?42 to 8(II)?47 [discussing automatic stay]; In re Hoggle (11th Cir. 1994) 12 F.3d 1008, 1008–1012 [affirming district court order denying lender’s motion for relief from automatic stay]; Lamarche v. Miles (E.D.N.Y. 2009) 416 B.R. 53, 55–62 [affirming bankruptcy court order denying landlord’s motion to set aside automatic stay]; In re Gatlin (Bankr. W.D.Ark. 2006) 357 B.R. 519, 520–523 [denying lender’s motion for relief from automatic stay].)

U.S. Bank maintains that even if Aceves had pursued relief under chapter 13, she could not have afforded the payments under a bankruptcy plan.  But the complaint alleged that, with the financial assistance of her husband, Aceves could have saved her home under chapter 13.  We accept the truth of Aceves’s allegations over U.S. Bank’s speculation.  (See Hensler v. City of Glendale, supra, 8 Cal.4th at p. 8, fn. 3.)

5.  Absence of Consideration

U.S. Bank argues that an oral promise to postpone either a loan payment or a foreclosure is unenforceable.  We have previously addressed that argument, stating:  “‘[I]n the absence of consideration, a gratuitous oral promise to postpone a sale of property pursuant to the terms of a trust deed ordinarily would be unenforceable under [Civil Code] section 1698.’  (Raedeke v. Gibraltar Sav. & Loan Assn. (1974) 10 Cal.3d 665, 673, italics added.)  The same holds true for an oral promise to allow the postponement of mortgage payments.  (California Securities Co. v. Grosse (1935) 3 Cal.2d 732, 733 [applying Civil Code section 1698].)  However, ‘. . . the doctrine of promissory estoppel is used to provide a substitute for the consideration which ordinarily is required to create an enforceable promise. . . . “The purpose of this doctrine is to make a promise binding, under certain circumstances, without consideration in the usual sense of something bargained for and given in exchange. . . .”’  (Raedeke, supra, 10 Cal.3d at p. 672.)  ‘“Under this doctrine a promisor is bound when he should reasonably expect a substantial change of position, either by act or forbearance, in reliance on his promise, if injustice can be avoided only by its enforcement. . . .”’”  (Sutherland v. Barclays American/Mortgage Corp. (1997) 53 Cal.App.4th 299, 312; accord, Garcia v. World Savings, FSB, supra, 183 Cal.App.4th at pp. 1039–1041.)  We further commented:  “When Raedeke and California Securities Co. were decided, Civil Code section 1698 provided in its entirety:  ‘A contract in writing may be altered by a contract in writing, or by an executed oral agreement, and not otherwise.’ . . . In 1976, a new section 1698 was enacted which states in part:  ‘A contract in writing may be modified by a contract in writing . . . [or] by an oral agreement to the extent that the oral agreement is executed by the parties. . . . Nothing in this section precludes in an appropriate case the application of rules of law concerning estoppel . . . .’”  (Sutherland v. Barclays American/Mortgage Corp., supra, 53 Cal.App.4th at p. 312, fn. 8, citations omitted.)  Our earlier analysis in Sutherland applies here.

Finally, a promissory estoppel claim generally entitles a plaintiff to the damages available on a breach of contract claim.  (See Toscano v. Greene Music (2004) 124 Cal.App.4th 685, 692–693.)  Because this is not a case where the homeowner paid the funds needed to reinstate the loan before the foreclosure, promissory estoppel does not provide a basis for voiding the deed of sale or otherwise invalidating the foreclosure.  (See Garcia v. World Savings, FSB, supra, 183 Cal.App.4th at p. 1047, distinguishing Bank of America v. La Jolla Group II (2005) 129 Cal.App.4th 706, 711–714.)

B.        Remaining Claims

The elements of fraud are similar to the elements of promissory estoppel, with the additional requirements that a false promise be made and that the promisor know of the falsity when making the promise.  (See McClain v. Octagon Plaza, LLC (2008) 159 Cal.App.4th 784, 792–794 [discussing elements of fraud].)  Aceves has adequately alleged those facts.

Aceves’s other claims and requests for relief lack merit as a matter of law.  All of them are based on alleged irregularities in the foreclosure process.  We see no irregularities that would justify relief.  For example, Aceves contends U.S. Bank’s designation of Quality Loan Service as the trustee under the deed of trust was defective because the “Substitution of Trustee” was signed by the bank’s attorney-in-fact.  But Aceves cites no pertinent authority for her contention.  (See Schoendorf v. U.D. Registry, Inc. (2002) 97 Cal.App.4th 227, 237–238 [party forfeits contention absent citation of authority].)  Neither Civil Code section 2934a, which governs the substitution of trustees, nor the trust deed itself precludes an attorney-in-fact from signing a Substitution of Trustee.  And case law strongly suggests Aceves is wrong.  (See Tran v. Farmers Group, Inc. (2002) 104 Cal.App.4th 1202, 1213 [“an attorney-in-fact is an agent owing a fiduciary duty to the principal”]; Burgess v. Security-First Nat. Bank (1941) 44 Cal.App.2d 808, 818–819 [person can perform any legal act through attorney-in-fact that he or she could perform in person, including entering into contracts].)

Aceves also takes issue with the notice of default, pointing out that it mistakenly identified Option One as the beneficiary under the deed of trust when U.S. Bank was actually the beneficiary.  Although this contention is factually correct, it is of no legal consequence.  Aceves did not suffer any prejudice as a result of the error.  Nor could she.  The notice instructed Aceves to contact Quality Loan Service, the trustee, not Option One, if she wanted “[t]o find out the amount you must pay, or arrange for payment to stop the foreclosure, or if your property is in foreclosure for any other reason.”  The notice also included the address and telephone number for Quality Loan Service, not Option One.  Absent prejudice, the error does not warrant relief.  (See Knapp v. Doherty (2004) 123 Cal.App.4th 76, 93–94 & fn. 9.)

Last, after the filing of the reply brief and before oral argument, we requested additional briefing on the protections accorded by chapter 13.  In her letter brief, Aceves went beyond the scope of the request and presented arguments not previously made about the order in which various documents were recorded.  The new arguments were unsolicited; Aceves did not explain why the arguments were not raised earlier; and U.S. Bank had no opportunity to respond.  Accordingly, we do not reach them.  (See City of Costa Mesa v. Connell (1999) 74 Cal.App.4th 188, 197; Campos v. Anderson (1997) 57 Cal.App.4th 784, 794, fn. 3.)

It follows that the trial court properly sustained the demurrer without leave to amend with respect to all claims and requests for relief other than the claims for promissory estoppel and fraud.  Aceves should be allowed to pursue those two claims.

III

DISPOSITION

The order and the judgment are reversed to the extent they dismissed the claims for promissory estoppel and fraud.  In all other respects, the order and judgment are affirmed.  Appellant is entitled to costs on appeal.

CERTIFIED FOR PUBLICATION.

MALLANO, P. J.

We concur:

ROTHSCHILD, J.

JOHNSON, J.

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MERS could be “harnessed by Congress and the industry to improve the mortgage finance system,” R.K. Arnold, its president and CEO, told a House subcommittee in November. Arnold retired this month.

By Prashant Gopal and Lorraine Woellert – Jan 27, 2011 12:01 AM ET

U.S. mortgage servicers face a new era of tighter oversight as regulators seek to cut the number of botched foreclosures and increase loan modifications for struggling borrowers.

The industry, which oversees $10.6 trillion in loans, has been overwhelmed by more than 3 million foreclosures since 2006. The housing-market collapse exposed failures — in the way servicers are paid, track loans and process property seizures — that threaten to stall a fledgling rebound in prices and sales.

“If we fail to act decisively now to deal with the foreclosure crisis, we risk triggering a double-dip in U.S. housing markets,” Sheila Bair, chairman of the Federal Deposit Insurance Corp., said in a Jan. 19 speech to mortgage-industry executives in Washington. “The problem is serious, and the need for action is urgent.”

Changes being studied include a new fee structure for servicers, independent reviews of rejected requests to ease loan terms and a fund to compensate victims of improper foreclosures, according to Bair and other federal and state regulators. Lawmakers have proposed reining in the privately run Merscorp Inc., even as the company says it could serve as a national mortgage registry.

Cardoza calls for more federal action to halt foreclosures

CBVT, WASHINGTON, D.C.
January 20, 2011 9:00pm

excerpts:

Dubbed the “Housing Opportunity and Mortgage Equity (HOME) Act,” H.R. 363 would allow as many as 30 million homeowners with mortgages backed by Fannie Mae or Freddie Mac to benefit from the current historically low market interest rates and refinance for up to 40 years at a fixed rate, Mr. Cardoza says.

[…]

“The HOME Act would provide a light at the end of the tunnel for the millions of homeowners struggling to make their monthly house payment,” says Mr. Cardoza.

Read H.R. 363 below…

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Excerpt:

COMMITTEE MEMBER: Can you explain what you are in
4 relation to that?
5 MR. HULTMAN: We’re the beneficiary, but we’re an
6 agent of the lender. So instead of having two — one party be
7 both the payee on the note and the beneficiary in deed of
8 trust, we’re the beneficiary as their agent. In other words,
9 we’re holding title to the mortgage lien on their behalf.
10 COMMITTEE MEMBER: Through this process called
11 nominee?
12 MR. HULTMAN: Well, nominee is just another word for
13 agent.

Continue below…

After you read the transcript, you might be interested in reading the post below

Lender can’t modify the mortgage without the “mortgagee’s” consent

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By Michael Kraus on January 18, 2011

Right now Virginia has one of the fastest foreclosure processes in the country.  As detailed in this Washington Post article by David Hilzenrath, there are several bills currently debated in the Virginia legislature that would slow the process and cause big changes in the way foreclosures are handled in that state.

The first proposed change would require judicial approval before a lender can seize a home.  This would serve to ensure the veracity of the documentation that is required in the foreclosure process. Flawed documentation has proven to be an issue in foreclosures across the country time and time again.

The next piece of legislation would force banks to give borrowers longer advance notice before they are able to auction a home.  Under the changes, homeowners would have 30-45 days warning that their home was to be sold rather than the two weeks that is currently required.

The last proposed bill is particularly interesting, because it would cause seismic shifts in mortgage lending in Virginia.  The law would require lenders to keep records on real estate transactions in local records offices (which is the way real estate transfers were done for hundreds of years).  This would make it harder, although not impossible, to securitize Virginia mortgages.  It would, however, effectively doom the Mortgage Electronic Registration Systems (MERS) in the State of Virginia.

“Not only do banks and mortgage lenders oppose the bill, a Reston-based corporation known as MERS (Mortgage Electronic Registration Systems) is battling it.”

Va. bills slow foreclosures

Updated: Monday, 17 Jan 2011, 7:59 PM EST
Published : Monday, 17 Jan 2011, 7:59 PM EST

• BOB LEWIS, AP Political Writer

RICHMOND, Va. (AP) – Virginia House and Senate bills are taking aim at “drive-by foreclosures” by big banks without judicial review and aggravated by incomplete records.

Witnesses at a hearing on some of the legislation Monday told chilling, tearful tales of giant banks foreclosing on their homes, then had to deal with conflicting statements by an unconcerned bureaucracy when they tried to contact their lenders and reason with them.

The legislation is in the works because of the flood of foreclosures that resulted from the 2008 mortgage lending industry collapse.

The bills would slow the state’s swift foreclosure pace. They would increase the time for required foreclosure notice from two weeks to 30 or 45 days. That would give borrowers time to locate records and hire attorneys to challenge foreclosures if necessary.

Link to bills introduced to the 2011 Virginia legislative session –

keyword search: Foreclosure; Deed of Trust; Assignment –

http://lis.virginia.gov/cgi-bin/legp604.exe?111+men+SRB

Who are my Virginia legislators, and how to contact them:

http://legis.virginia.gov/1_cit_guide/contacting_my.html

JAMES KEITH HOOTEN, et al. GERRY RENEE HOOTEN, Plaintiffs,
v.
OCWEN LOAN SERVICING, LLC, Defendant.

Cause No. 1:09cv491-LG-RHW.

United States District Court, S.D. Mississippi, Southern Division.

January 11, 2011.

MEMORANDUM OPINION AND ORDER DENYING SUMMARY JUDGMENT

LOUIS GUIROLA Jr., District Judge.

BEFORE THE COURT is Defendant Ocwen Loan Servicing, LLC’s Motion for Summary Judgment [30]. Plaintiffs James Keith and Gerry Renee Hooten initiated this action against their mortgage holder after their home was lost in a tax sale. Ocwen argues (1) it owed no contractual duty to pay the past due taxes, (2) the Statute of Frauds bars any oral modifications, (3) the Hootens released Ocwen from all claims, (4) and the taxes were not escrowed. The Court has considered the parties’ submissions^[1] and the relevant legal authority. The motion is denied.

Continue below…

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PACHECO v. EMC Mortgage Corp & The Bear Stearns Companies LLC [Read Complaint Below]

SEATTLE, January 10, 2011 (GlobeNewswire) – Attorney Advertising. Keller Rohrback L.L.P. (www.krclassaction.com) announces that a class action has been filed in the United States District Court for the Eastern District of Washington on behalf of all mortgagors in the State of Washington whose home mortgage loans are serviced by EMC Mortgage Corporation and who (a) have attempted to obtain modifications of their loan terms from EMC; and (b) have made payments pursuant to a “Repayment Agreement,” a Home Affordable Modification Program (“HAMP”) trial modification plan, or any other temporary modification plan.

The complaint alleges, among other things that the Defendants: engaged in bad faith as to home mortgage loan modification negotiations; led mortgagors to reasonably believe and rely on Defendants’ representations that they would permanently modify their mortgage loans upon successful completion of “Repayment Agreements” or other trial programs; charged unreasonable, unlawful, or excessive fees; failed to properly disclose and/or concealed fees and other charges; failed to provide to mortgagors a proper or comprehensible accounting of fees, payments, credits, arrearages, and amounts owed; improperly or under-applied mortgage payments to accounts; and breached “Repayment Agreements” or other trial modification program contracts or promises. The complaint has been filed pursuant to the Washington Consumer Protection Act and contains additional claims for breach of contract, breach of the duty of good faith and fair dealing, promissory estoppel, and unjust enrichment.

Keller Rohrback is also investigating the following mortgage loan servicers regarding mortgage loan modifications in Washington and elsewhere:

• American Home Mortgage Servicing, Inc.
• Aurora Loan Services, LLC
• Citimortgage, Inc.
• GMAC Mortgage, Inc.
• JPMorgan Chase Bank NA
• Litton Loan Servicing LP
• Nationstar Mortgage LLC
• OneWest Bank
• SunTrust Mortgage, Inc.

If your home mortgage loan is serviced by EMC Mortgage Corporation or any of the above-listed servicers and you have questions regarding these matters, please contact paralegal Nick Wallace or attorneys Gretchen Obrist or Lynn Sarko at 800.776.6044 or via email at info@kellerrohrback.com.

For additional information regarding the litigation, please click here.

Keller Rohrback, with offices in Seattle, Phoenix, Santa Barbara and New York, is committed to helping individuals protect their investments. Keller Rohrback has successfully provided class action representation for over a decade. Its litigators have obtained judgments and settlements on behalf of clients in excess of seven billion dollars.

Attorney Advertising. Prior Results Do Not Guarantee A Similar Outcome.

CONTACT:
Keller Rohrback L.L.P.
Nick Wallace, Paralegal
(800) 776-6044
info@kellerrohrback.com
www.krclassaction.com

Source: Keller Rohrback L.L.P. Keller Rohrback L.L.P. Announces Class Action Complaint Filed Against EMC Mortgage Corp. and The Bear Stearns Companies LLC

Continue Reading the complaint below…

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UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA

GUSTAVO REYES, ET AL., Plaintiffs,

v.

WELLS FARGO BANK, N.A., Defendant

[…]

IV. CONCLUSION

For the reasons stated above, Defendant’s Motion is GRANTED in part and DENIED in part
as follows: 1) the Motion is GRANTED as to Plaintiffs’ claim for breach of contract/breach of the
implied covenant of good faith and fair dealing, which is dismissed for failure to state a claim.
Because the Court concludes that Plaintiffs cannot state a claim by amending their complaint, this
claim is dismissed without leave to amend; 2) the Motion is GRANTED as to Plaintiffs’ claim for
restitution/rescission except as to Plaintiffs’ March payment, as to which Plaintiffs state a claim.
Otherwise, the claim is dismissed without leave to amend; 3) the Motion is DENIED as to Plaintiffs’
claim under the Rosenthal Act; and 4) the Motion is DENIED as to Plaintiffs’ unfair competition
claim under Cal. Bus. & Prof. Code §§ 17200 et seq.

IT IS SO ORDERED.

Dated: January 3, 2011

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Office of Attorney General Terry Goddard

Terry Goddard Charges Bank of America with Mortgage Fraud

(Phoenix, Ariz – Dec. 17, 2010) Attorney General Terry Goddard announced that his Office today filed a lawsuit against Bank of America Corporation and its affiliated companies (“Bank of America”) alleging violations of the Arizona Consumer Fraud Act and violations of the consent judgment entered in March 2009 between Arizona and the Countrywide companies owned by Bank of America.

The lawsuit, filed in Maricopa County Superior Court, was triggered by hundreds of consumer complaints and follows a year-long investigation into Bank of America’s residential mortgage servicing practices, particularly its loan modification and foreclosure practices.

Read full complaint below…

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Las Vegas: Attorney General Catherine Cortez Masto announced today that her office is filing a lawsuit against Bank of America Corporation, N.A., BAC Home Loans Servicing, LP, Recon Trust Company (“Bank of America”) for engaging in deceptive trade practices against Nevada homeowners.

The lawsuit, filed in the Eighth Judicial District of the State of Nevada, was triggered by consumer complaints and follows an extensive investigation into Bank of America’s alleged deceptive practices involving its residential mortgage servicing, particularly its loan modification and foreclosure practices.

The Complaint alleges that Bank of America is:
1)
Misleading consumers by promising to act upon requests for mortgage modifications within a specific period of time;
2)
Misleading consumers with false assurances that their homes would not be foreclosed while their requests for modifications were pending, but sending foreclosure notices, scheduling auction dates, and even selling consumers’ homes while they waited for decisions;
3)
Misrepresenting to consumers that they must be in default on their mortgages to be eligible for modifications when, in fact, current borrowers are eligible for assistance;
4)
Making false promises to consumers that their modifications would be made permanent if they successfully completed trial modification periods, but then failing to convert these modifications;
5)
Misleading consumers with inaccurate and deceptive reasons for denying their requests for modifications;
6)
Falsely notifying consumers or credit reporting agencies that consumers are in default when they are not;
7)
Misleading consumers with offers of modifications on one set of terms, but then providing them with agreements on different sets of terms, or misrepresenting that consumers have been approved for modifications.

Continue Below…

[ipaper docId=45603019 access_key=key-x558xy7fhrcx4fh6aql height=600 width=600 /]

ANITA A. VIDA, Plaintiff,
v.
ONEWEST BANK, F.S.B., a Delaware corporation formerly known as IndyMac Federal Bank, F.S.B., and FEDERAL NATIONAL MORTGAGE ASSOCIATION, a Government Chartered Association formerly known as Fannie Mae, Defendants.

Civ. No. 10-987-AC.

United States District Court, D. Oregon, Portland Division.

December 13, 2010.

OPINION AND ORDER

JOHN V. ACOSTA, Magistrate Judge.

Introduction

Plaintiff Anita A. Vida (“Vida”) alleges claims for breach of contract and fraud, and seeks declaratory judgment cancelling the trust deed and reinstating her mortgage. Defendants OneWest Bank, FSB (“OneWest”) and Federal National Mortgage Association (“FNMA”) (collectively “Defendants”) move for dismissal of all claims. Defendants argue that Vida has failed to state a claim for relief on the following grounds: (1) Vida may not state a breach of contract claim arising under the Home Affordable Mortgage Program (“HAMP”) because it does not authorize a private right of action; (2) Vida has not pleaded her fraud claim with sufficient particularity; and (3) Vida’s allegation that she did not receive adequate notice of the foreclosure action is preempted by state law. Defendants assert generally that Vida has otherwise failed to state claims of breach of contract and fraud.

Continue Below…

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December 17, 2010, 11:29 AM ET

By Nick Timiraos

Bank of America helpfully sent out a letter last week informing a Brooklyn homeowner that the bank didn’t have all the documents needed to finalize a loan modification application.

“Our records indicate that we are still missing some of the required documents, or some of the documents were sent to us with missing or incorrect information,” said the form letter dated Dec. 6.

But there was one problem: the letter was addressed to the couple that sold the Brooklyn apartment in 1998. It arrived in the mailbox of a Wall Street Journal reporter who bought that apartment and has never had a mortgage on it.

It’s no secret that banks’ paperwork problems have plagued the Obama administration’s Home Affordable Modification Program, or HAMP, and the letter offers a glimmer into potential miscues. Borrowers frequently tell of sending and resending paperwork three or four times, while banks often say that modifications aren’t being completed because borrowers aren’t filing all the necessary documentation.

Bank of America says this letter was sent in error after a loan modification negotiator entered in the wrong nine-digit loan number and that the incident appears to have been “very isolated.” “It was simply someone going into a template [who] punched in the wrong number,” said a bank spokeswoman. “Obviously, we’re very sorry for the confusion.”

JP Morgan Chase Bank, N.A.,

-against-

Carlo Scissura

Excerpt:

why an Order should not be granted directing plaintiff:

(a) to comply with this Court’s Order dated September 8, 2010;

(b) to immediately file a Stipulation of Discontinuance;

(c) to immediately file a consent to vacate the lis pendens lien
filed against 8024 13‘h Avenue, Brooklyn, New York and
defendants Carlo Scissura a/k/a Carlo A. Scissura and/or
Sinagra Management, Inc.;

(d) to issue the final loan modification documents;

(e) imposing sanctions against the plaintiff, pursuant to 22
NYCRR 130-1.1; and

(9 whatever and further relief the Court may deem just and
proper.

Continue below…

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Bank evicts, then offers Boca Raton couple a loan mod

By Kimberly Miller Palm Beach Post Staff Writer
Updated: 10:34 p.m. Saturday, Dec. 4, 2010
Posted: 10:27 p.m. Saturday, Dec. 4, 2010

In hours of congressional hearings last week, the nation’s banks were repeatedly condemned for dual-track loan modification systems that give hope to homeowners seeking lower monthly payments while at the same time foreclosing on their properties behind their backs.

“Unacceptable deficiencies,” is how the acting director of the Federal Housing Finance Agency put it. Failed oversight, ineffective practices and insufficient staffing were criticisms added by other top regulators and legislators.

Boca Raton resident James Strass­burger could have told lawmakers all that. He just wishes they were listening this year when One West Bank sold his home at foreclosure auction during negotiations for a loan modification.

Strassburger, 56, and his wife, Deborah, 58, who lived in their home for 19 years, were ordered out in May, holding two yard sales so they could squeeze into a rented apartment.

But the real kick in the gut came in August, six months after the auction, when they got a letter congratulating them for earning a trial loan modification. It was followed by a note alerting them to a hearing­ that would essentially give them their home back. Their mortgage payment was due Sept. 1, the letter reminded.

“This all could have been avoided. We could have been living our lives,” said James Strass­burger, a former business owner whose flooring jobs dropped off when the economy fell. “It’s not a good feeling. I don’t like seeing my wife cry.”

One West Bank said it was looking into the Strass­burgers’ case, but did not respond to a request for comment for this story.

Washington lawmakers began paying earnest attention to the nation’s foreclosure nightmare this fall as banks pulled back on their home repossessions after acknowledging assembly line-like processing systems had potentially illegal shortcomings.

Hastily prepared court documents, as well as the dual-track foreclosure and loan modification process, were discussed Wednesday in a hearing of the Senate Committee on Banking, Housing and Urban Affairs, and Thursday in the House Judiciary Committee.

Mistaken foreclosure costly to family

Bank modified Peoria couple’s mortgage, then mistakenly sold their house in.

Stop Foreclosure Fraud needs your help America in locating more information on any and all of the following tips received recently… We need to be educated on how it all works!

This is before the new BofA EQUATOR was put into place early 2010.

In no particular order:

1. Any information on I-PORTAL SYSTEM “Partitions” this has to do with special levels of digitized files and documents. (This system  is where “original” loan files were scanned as soon as they arrived).
   
2. Any Information on C-SAD, the database containing securitization information. CSAD database where the loss mitigation personnel would look up who the investor and master servicers were and what the level of delegation CW had for decision making on the modification or short sale requests, the credit file.
3. The mainframe AS 400 system which was the ancient DOS database where the loan info, tax and insurance info, mortgage insurance info and foreclosure notes were kept.
4. All “US Fax Numbers” that the borrowers are asked to fax in QWR, Short Sales, Loan Modification Departments BUT are redirected to INDIA.
   
5. The Short Sale Process of 11 systems that one has to log into and out of independently.

As always your comments and email tips located on the header are appreciated.

*Keep in mind that the fax numbers go directly to INDIA and your fax is converted into a PDF, labeled and then uploaded into the I-Portal system from INDIA, giving access to CW employees in various locations to these files.

NO PAPER IS BEING SHUFFLED.

COUNT I:

BREACH OF CONTRACT / BREACH OF DUTY OF GOOD FAITH
AND FAIR DEALING

COUNT II:

PROMISSORY ESTOPPEL, IN THE ALTERNATIVE

COUNT III:

VIOLATION OF CONSUMER PROTECTION ACT,
RCW 19.86.010 ET SEQ

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FIRST CAUSE OF ACTION

(Breach of Covenant of Good Faith and Fair Dealing)

SECOND CAUSE OF ACTION

(Equitable Estoppel)

THIRD CAUSE OF ACTION

(Inducing Breach of Contract)

FOURTH CAUSE OF ACTION

(Unjust Enrichment)

FIFTH CAUSE OF ACTION

(Violation of California Business & Professional Code 17200, et seq., Unlawful, Unfair, or Fraudulent Business Practices)

WELLS FARGO CA

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via: mlinc06

GMAC offers loan modification, accepts payments, and forecloses on homeowners, 5 months into the modification, despite GMAC representative admitting that homeowner was not at fault. Listen to the bank admit to missapplying payments, while foreclosing on Los Angeles, CA homeowners.

FIRST COUNT

Breach of Contract

SECOND COUNT

Breach of Covenant of Good Faith and Fair Dealing

THIRD COUNT

Fraud/Intentional Misrepresentation

FOURTH COUNT

Constructive Fraud/Negligent Misrepresentation

FIFTH COUNT

Negligent Processing of Loan Modifications and Foreclosures

SIXTH COUNT

Violation of the New York Deceptive Practices Act, N.Y. Gen. Bus. Law 349, et.seq.

SEVENTH COUNT

Violation of the New Jersey Consumer Fraud Act (“CFA”), N.J.S.A. 56.8-1, et. seq.

EIGHTH COUNT

Violation of Constitutional Rights Under Color of State Law, 42 U.S.C. 1983

BRIAN COSTIGAN v. Citigroup

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BAC Home Loans Servicing v Westervelt
2010 NY Slip Op 51992(U)
Decided on November 18, 2010
Supreme Court, Dutchess County
Pagones, J.

LISA GORDON, ESQ.
FRANKEL LAMBERT, WEISS,
WEISMAN & GORDON, LLP
Attorneys for Plaintiff
20 West Main Street
Bay Shore, New York 11706

Excerpt:

Not surprisingly, in the wake of this new legislation, decisions are beginning to emerge in which the courts are finding that the banks have engaged in discriminatory, unconscionable, and onerous lending practices and are now negotiating settlements of these oppressive loans in bad faith. In particular, one court, upon finding that the bank’s conduct “has been and is inequitable, unconscionable, vexatious and opprobrious,” vacated the judgment of foreclosure and canceled [*5]the entire mortgage obligation (see IndyMac Bank v Yano-Horoski, 26 Misc 3d 717 [Sup. Ct, Suffolk County 2009]) and in another case, upon finding that the bank’s conduct was “shockingly inequitable” and in bad faith, the same court forever barred the bank from collecting claimed interest accrued on the loan from the date of default and any claimed legal fees and expenses; fixed the mortgage obligation to be no more than the principal balance, and awarded exemplary damages in the amount of $100,000 (see Emigrant Mtge. Co., Inc. v Corcione, NYLJ, Apr. 21, 2010, at 25 col 3 [Sup. Ct, Suffolk County, Spinner, J.). In another case, the court fashioned an equitable remedy when the parties reach an impasse in settlement negotiations. The bank had agreed to a modification lowering the mortgage payment to $3,000 per month, but the homeowners sought to pay $2,000 per month. The court, concerned with “discriminatory lending practices” and the fact that “the mortgage was granted to a minority buyer for the purchase of property in a minority area” which would eventually call for an interest rate exceeding 9%, found a rebuttable presumption of discriminatory lending practice and froze the interest rate at a maximum of 9%. In addition, the court ordered the homeowners to make a deposit into the court of $10,000 to avoid foreclosure and ordered the parties to split the $1,000 difference in the mortgage payment gap (see Aames, supra).

Accordingly, the court, sua sponte, finds that the Bank has not acted in good faith in negotiating a settlement with this homeowner. Indeed, the homeowner’s representation that plaintiff inexplicably refused to re-examine her income – which the bank must do under HAMP directives – stands uncontradicted. Further, in the face of counsel’s inadequate excuse for defaulting in appearance and failing to follow up with the court attorney referee, counsel still categorically refuses to comply with the spirit of the statute and work towards a modification with this homeowner, even though the homeowner earns income to sustain a modified payment. This court is hard-pressed to comprehend why plaintiff would rather seize the property in foreclosure than work out a loan modification, as required by statute, with a homeowner who is gainfully employed.

The Bank elected to pursue an equitable remedy (see Bieber v Goldberg, 133 App Div 207, 210 [2d Dep’t 1909]; see also IndyMac, supra]), and “the very commencement of this action by Plaintiff invokes the Court’s equity jurisdiction” (IndyMac, supra, 26 Misc 3d at 723). In addition, the court seeks to ensure that the primary statutory goal of keeping homeowners in their homes (see CPLR R3408[a]) and the concomitant obligation of ensuring that the parties act in good faith (see 22 NYCRR 202.12-a(c)(4) are met. Toward that end, this court has the power to impose an equitable remedy commensurate with the Bank’s bad faith regarding this loan modification (see e.g. Aaems Funding Corp., supra; IndyMac, supra; M & T Mtge. Corp. v Foy, 20 Misc 3d 274 [Sup. Ct, Kings County 2008]).

Based on the foregoing, it is hereby

ORDERED that the law firm of Frankel Lambert, Weiss, Weisman & Gordon, LLP shall appear at a hearing to be scheduled to show cause why it should not be sanctioned in an amount to be determined by the court pursuant to 22 NYCRR §130-2.1; and it is further

ORDERED that plaintiff is barred from collecting any arrears incurred from October 8, 2010 (the date the homeowner received the HAMP denial) until the date the homeowner is given a final determination on her loan modification application, after review and determination of all possible modifications for which the homeowner may be eligible and the case is released from [*6]the settlement part;

ORDERED that plaintiff is barred from collecting any interest incurred from October 8, 2010 until the date of a final loan modification determination and the case is released from the settlement part; and it is further

ORDERED that any unpaid late fees are waived from October 8, 2010; and it is further

ORDERED that any loan modification fees are to be either waived or refunded to the homeowner; and it is further;

ORDERED that any attorneys’ fees claimed to have been incurred from the date of the default until the date of this order are not to be included in the calculation of the homeowners’ modified mortgage payment or otherwise imposed on the homeowners, but, rather, any request for attorneys fees is hereby severed and to be submitted to the court for separate, independent review as to their reasonableness; and it is further

ORDERED that the parties appear for a further conference in the Foreclosure Settlement Part of the Dutchess County Supreme Court, 10 Market Street, Poughkeepsie, New York on December 20, 2010 at 12 p.m.; and it is further

ORDERED that a bank representative fully familiar with the file and with full authority to settle the matter appear at the next conference, and it is further

ORDERED that Frankel Lambert, Weiss, Weisman & Gordon, LLP is directed to appear at the next conference by either a member of the firm or an associate of the firm. Local Counsel may not appear at this conference. Appearing counsel must be fully authorized to dispose of the case as required by statute (see CPLR 3408[c]).

Adjournments are only granted with leave of court.

Failure of plaintiff to comply with this order may result in further sanctions, including discharge of the underlying mortgage obligation, exemplary damages and loss of the privilege of appearing by local counsel in all foreclosure settlement conferences conducted in Dutchess County.

This constitutes the decision and order of the court.

BAC Home Loans Servicing v WESTERVELT

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