Case Name: Ralph Theodule, et al. v. Bank of America, N.A., et al.
Case No.: 16-CV-291676

I. Background

This breach of contract lawsuit arises from a dispute over a mortgage modification. Plaintiffs Ralph and Deborah Theodule (collectively, “Plaintiffs”) own real property located at 2357 Shelley Avenue in San Jose, California (the “Property”). (First Amended Complaint (“FAC”), ¶ 4.) In April 2006, Plaintiffs refinanced their mortgage on the Property through nonparty Diablo Funding, Inc., executing a “first-lien Deed of Trust and Promissory Note” in its favor. (FAC, ¶ 10.) Subsequently, defendant Bank of America, N.A. (“Bank of America”) succeeded Diablo Funding, Inc. as beneficiary. (FAC, ¶ 11.)

In 2012, Plaintiffs submitted to Bank of America a loan modification application to avoid foreclosure. (FAC, ¶ 12.) Bank of America approved Plaintiffs’ application and offered them a permanent modification contingent upon successful completion of a trial period. (FAC, ¶ 12.) During the trial period from January until March 2013, Plaintiffs were required to timely make three modified payments in the amount of $3,122.35. (FAC, Ex. A.) Upon successful completion of the trial period, the modification would become permanent; Bank of America would permanently reduce the principal balance by $42,400.13, set the interest rate at 2.88 percent, and consider their account current. (FAC, Ex. A.)

Plaintiffs allege they timely made all three modified payments during the trial period sufficient to render the modification permanent, but they never received any confirmation from Bank of America thereafter. (FAC, ¶¶ 13-15.) Consequently, Plaintiffs continued to make modified payments as they had during the trial period. (FAC, ¶¶ 13-15.) In May 2013, Plaintiffs noticed their April and May payments had not been credited to their account and requested delivery confirmation to prove they remitted the payments. (FAC, ¶¶ 14-15.) In December 2013, Plaintiffs noticed some of the payments they made had not been withdrawn from their bank account. (FAC, ¶ 16.) Plaintiffs apparently interpreted this as a failure to make the modification permanent, which they deemed a breach of their agreement with Bank of America, and so they stopped making loan payments. (FAC, ¶ 17.)

In January 2015, defendant Wilmington Savings Fund Society, FSB (doing business as Christiana Trust) became the successor in interest to Bank of America, and Rushmore Loan Management Services, LLC (“Rushmore”) became the servicer for the loan. (FAC, ¶ 17.) When Plaintiffs asked Rushmore about their permanent modification, it informed them it was “not bound by [their] agreement with [Bank of America].” (FAC, ¶ 18.) Consequently, Plaintiffs commenced this lawsuit. (FAC, ¶ 19.)

Plaintiffs assert two causes of action against the defendants for: (1) breach of contract (against Bank of America); and (2) breach of contract (against Wilmington Savings Fund Society, FSB and Rushmore).

Currently before the Court is a motion for summary judgment and/or summary adjudication by Bank of America (hereinafter, “Defendant”).

II. Standard of Review

“A party may move for summary judgment in an action or proceeding if it is contended that the action has no merit [ ].” (Code Civ. Proc., § 437c, subd. (a)(1).) “A defendant [ ] has met his or her burden of showing that a cause of action has no merit if the party has shown that one or more elements of the cause of action, even if not separately pleaded, cannot be established, or that there is a complete defense to the cause of action.” (Code Civ. Proc., § 437c, subd. (p)(2).) To carry this burden, the defendant must present evidence, such as “affidavits, declarations, admissions, answers to interrogatories, depositions, and matters of which judicial notice shall or may be taken.” (Code Civ. Proc., § 437c, subd. (b)(1).)

“Once the defendant [ ] has met that burden, the burden shifts to the plaintiff [ ] to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto.” (Code Civ. Proc., § 437c, subd. (p)(2).) “The party opposing the summary judgment must make an independent showing by a proper declaration or by reference to a deposition or another discovery product that there is sufficient proof of the matters alleged to raise a triable question of fact if the moving party’s evidence, standing alone, is sufficient to entitle the party to judgment.” (Wiz Technology, Inc. v. Coopers & Lybrand LLP (2003) 106 Cal.App.4th 1, 10-11; Code Civ. Proc., § 437c, subd. (b)(2); see also Code Civ. Proc., § 437c, subd. (p)(2) [“The plaintiff [ ] shall not rely upon the allegations or denials of its pleadings to show that a triable issue of material fact exists but, instead, shall set forth the specific facts showing that a triable issue of material fact exists as to the cause of action or a defense thereto.”].)

“The motion for summary judgment shall be granted if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” (Code Civ. Proc., § 437c, subd. (c).)

“A motion for summary adjudication may be made [ ] as an alternative to a motion for summary judgment and shall proceed in all procedural respects as a motion for summary judgment.” (Code Civ. Proc., § 437c, subd. (f)(2).) A motion for summary adjudication “shall be granted only if it disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty.” (Code Civ. Proc., § 437c, subd. (f)(1).)

III. Evidentiary Matters

Both parties filed requests for judicial notice.

A. Defendant’s Request for Judicial Notice

Defendant requests judicial notice of a deed of trust and two assignments of the deed of trust, which were recorded in connection with the Property. (Def. Request for Judicial Notice (“RJN”), Exs. 1-3.)

As a general matter, a court may take judicial notice of undisputed facts appearing on the face of a recorded document, such as the fact of the document’s recordation, the parties to the transaction, the date the parties executed and recorded the document, and legally operative language therein. (Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919, 924, fn. 1, citing Evid. Code, § 452, subd. (h).) A court may then rely upon the legal effect of the document as deduced from these facts. (See Poseidon Development, Inc. v. Woodland Lane Estates, LLC (2007) 152 Cal.App.4th 1106, 1117-18.)

With that said, a court need not take judicial notice of a matter unless it “is necessary, helpful, or relevant.” (Jordache Enterprises, Inc. v. Brobeck, Phleger & Harrison (1998) 18 Cal.4th 739, 748, fn. 6.) Defendant does not cite these recorded documents in its memorandum of points and authorities or separate statement, and it is not otherwise obvious it is relying on them. Consequently, the recorded documents are not necessary, helpful, or relevant to the resolution of the motion. Thus, Defendant’s request for judicial notice is DENIED.

B. Plaintiffs’ Request for Judicial Notice

Plaintiffs request judicial notice of the fact that a mailing center known as “Postal Annex+” is located at the following address: 1177 Branham Lane, San Jose, California. To support their request, Plaintiffs submit a printout from the mailing center’s website showing its locations. (Pl. RJN, Ex. A at p. 2.)

A matter is not subject to judicial notice as an indisputable fact simply because it is published on a website. (Huitt v. Southern Cal. Gas Co. (2010) 188 Cal.App.4th 1586, 1604, fn. 10, citing Evid. Code, § 452, subd. (h).) Nevertheless, when a fact appearing on a website is not actually disputed, judicial notice is proper so long as the fact can be determined from a source of reasonably indisputable accuracy. (See Scott v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 743, 760-61.)

It is not actually disputed that the mailing center known as Postal Annex+ has a location at 1177 Branham Lane. Additionally, the Court can determine this fact from a source of reasonably indisputable accuracy because the printout submitted by Plaintiffs is from the mailing center’s own official website. Ultimately, the fact is relevant to the disposition of the motion because Defendant argues it attempted to deliver loan modification documents to Plaintiffs at this address. Consequently, the fact is a proper subject of judicial notice. Plaintiffs’ request is therefore GRANTED.

IV. Discussion

A. Summary Judgment

Defendant moves for summary judgment on the ground the action lacks merit because Plaintiffs cannot establish one or more essential elements of their breach of contract claim. “[T]he elements of a cause of action for breach of contract are (1) the existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to the plaintiff.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.) Defendant argues Plaintiffs cannot establish the elements of breach and damages. (Not. of Mot. at p. 2:14-17; Mem. of Pts. & Auth. at pp. 3:23-24, 5:21-22.)

Defendant first argues “a contract modifying the loan agreement was not formed, and [it] could not therefore be deemed in breach of any such alleged contract [,]” because Plaintiffs rejected the permanent modification agreement it sent them. (Mem. of Pts. & Auth. at p. 5:13-15.) In other words, although Defendant frames its argument as a challenge to the third element, breach, it appears it is in actuality challenging the first element, the existence of a contract. In either case, its argument lacks merit for the following reasons.

The most significant problem with Defendant’s argument is that it does not address the existence of the contract actually alleged. In the first cause of action, Plaintiffs allege Defendant breached the “Trial Period Plan” by failing to make the modification permanent upon their successful completion of the trial period. (FAC, ¶ 26.) The first cause of action is not based on a separate and distinct permanent modification agreement. Thus, the premise that no permanent modification agreement exists does not logically support the conclusion that Plaintiffs cannot establish the existence of the contract alleged in the first cause of action, specifically the Trial Period Plan.

To be sure, Defendant does not argue the Trial Period Plan is not an enforceable contract. For example, Defendant does not frame the Trial Period Plan as an option contract and argue Plaintiffs did not satisfy a condition precedent such that it was not ultimately required to perform. Instead, Defendant proceeds as though the permanent modification agreement it sent is the primordial offer and thus the starting place for the Court’s analysis of the issue of contract formation. Defendant offers no logical, legal, or factual justification for beginning the analysis there. Thus, Defendant’s approach is inapt.

Additionally, even assuming Plaintiffs’ first cause of action depended on the formation of a new contract, Defendant does not substantiate its assertion that they rejected its offer. The legal premise of Defendant’s assertion is sound. “It is hornbook that an unequivocal rejection by an offeree, communicated to the offeror, terminates the offer; even if the offeror does no further act, the offeree cannot later purport to accept the offer and thereby create enforceable contractual rights against the offeror.” (Beverly Way Associates v. Barham (1990) 226 Cal.App.3d 49, 55.) Defendant, nevertheless, does not adduce evidence or cite authority to support the conclusion that Plaintiffs unequivocally communicated a rejection of its offer.

First, it is essential that the offer be communicated to the offeree. (Civ. Code, § 1565; see also Rest.2d Contracts, § 23.) If the offeree does not actually know about the offer, he or she cannot reject it. (See Am. Bldg. Maintenance Co. v. Indemnity Insurance Co. of N. Am. (1932) 214 Cal. 608, 618.) But Defendant does not show it communicated and Plaintiffs knew about the offer it mailed.

The evidence shows that, on March 9, 2013, Defendant used FedEx to ship a package addressed to Deborah Theodule to 1177 Branham Lane, # 420 in San Jose, California. (Stephens Decl., Ex. A.) This address was the mailing address for Plaintiffs’ bankruptcy attorney, at least until September 2012. (Magaddino Decl., Ex. 2.) When FedEx attempted to deliver the package to this address on March 11, 2013, it was “refused.” (Stephens Decl., ¶ 4.)

Contrary to what Defendant represents, the evidence does not show Plaintiffs specifically asked for a permanent modification agreement to be delivered to their bankruptcy attorney. The record does not even reflect if this attorney continued to represent them or receive mail at the Branham Lane address, which was a mailing address only, at the time. Ultimately, FedEx did not complete delivery of the package. Thus, the evidence does not support the conclusion that Plaintiffs or their bankruptcy attorney received this offer.

Furthermore, the evidence does not show Plaintiffs, either independently or through their counsel, refused delivery of the package. Defendant presents no evidence showing what exactly “refused” means or who refused to accept the package. Significantly, because there is no evidence showing the package was properly addressed and delivered to the address on Branham Lane, there is no basis for inferring the refusal was an unequivocal rejection attributable to Plaintiffs and not simply a delivery problem.

Incidentally, as Plaintiffs point out in their opposition, their attorney received mail at the mailing center known as Postal Annex+; the mailing address to which Defendant sent the documents was not their attorney’s home or office. (Theodule Decl., ¶ 11.) Additionally, Defendant did not indicate the package was being delivered to Plaintiffs in the care of their attorney, who was the individual renting and affiliated with the private mailbox at PostalAnnex+. (Stephens Decl., Ex. A; see also Koster Decl., Ex. B at Bates No. Theodule v. BANA 00025 [customer account notes say to mail documents “c/o” for proper delivery].) Thus, at best, the evidence shows the mail was rejected as undeliverable by the mailing center because Plaintiffs were not affiliated with the mailing address and Defendant did not properly address the mail to Plaintiffs in the care of their attorney sufficient for the mailing center to determine the package was being delivered to one of its customers, accept the package, and route the package to the correct mailbox. The evidence does not show Plaintiffs or their attorney personally and affirmatively refused to accept the package.

Even assuming Plaintiffs or their attorney refused to accept the package without opening it, Defendant cites no case in which a court held such conduct constituted an unequivocal rejection of an offer.

In summary, Defendant’s argument that Plaintiffs rejected its offer lacks merit.
Defendant also asserts Plaintiffs never signed and returned the permanent modification agreement and raises the statute of frauds as an additional basis for concluding no contract was formed. Setting aside the fact that Defendant does not demonstrate Plaintiffs received the agreement in the first place, its argument is misguided.

“A contract coming within the statute of frauds is invalid unless it is memorialized by a writing subscribed by the party to be charged. . . .” (Secrest v. Security Nat. Mortgage Loan Trust 2002-2 (2008) 167 Cal.App.4th 544, 552-53.) “‘The primary purpose of the Statute is evidentiary, to require reliable evidence of the existence and terms of the contract and to prevent enforcement through fraud or perjury of contracts never in fact made.’ [Citation.]” (Sterling v. Taylor (2007) 40 Cal.4th 757, 766.) “[A] contract or agreement in legal contemplation is neither written nor oral, but oral or written evidence may be received to establish the terms of the contract or agreement between the parties.” (Lande v. Southern Cal. Freight Lines (1948) 85 Cal.App.2d 416, 420.) As one court explained, when the statute of frauds applies, “contracts orally made are in themselves perfectly valid, but, by reason of the requirement that they shall be reduced to writing, they are not enforceable in a judicial proceeding, unless committed to writing.” (Kinney v. Jos. Herspring & Co. (1921) 53 Cal.App. 628, 636-37.) Thus, although the statute of frauds renders some contracts unenforceable when there is insufficient written evidence thereof, the statute of frauds is not a rule of contract formation and has no bearing on the existence or substantive validity of a contract at its inception. (See Masin v. Drain (1984) 150 Cal.App.3d 714, 717-18, citing Warder v. Hutchison (1924) 69 Cal.App. 291, 295.) Consequently, Defendant’s argument that there is no valid agreement because Plaintiffs did not sign and return a written agreement as required by the statute of frauds lacks merit.

For the reasons set forth above, Defendant does not demonstrate Plaintiffs cannot establish the existence of a contract or a breach thereof.

Turning to the element of damages, Defendant argues it did not cause Plaintiffs to incur any damages. Defendant’s argument is predicated on the preceding unmeritorious argument about the existence and breach of the permanent modification agreement it sent. Defendant does not advance any other supporting arguments or present evidence showing, as a matter of fact, Plaintiffs have not suffered any damages. Accordingly, Defendant does not demonstrate Plaintiffs cannot establish the damages element of their claim.

In conclusion, Defendant does not carry its initial burden of demonstrating Plaintiffs cannot establish one or more essential elements of their breach of contract claim. Accordingly, the motion for summary judgment is DENIED.

B. Summary Adjudication

In the alternative, Defendant requests summary adjudication of three issues: (1) the first cause of action fails because it did not breach any contract; (2) the first cause of action fails because Plaintiffs were not injured; and (3) “Plaintiffs are not entitled to attorney’s fees.” (Not. of Mot. at p. 2:14-18.) But Code of Civil Procedure section 437c, subdivision (f)(1) does not authorize summary adjudication of “issues” generally. Ordinarily, the only “issue” that is a proper subject of a motion for summary adjudication is an “issue of duty.” (Code Civ. Proc., § 437c, subd. (f)(1); see Paramount Petroleum Corp. v. Super. Ct. (2014) 227 Cal.App.4th 226, 238-39.) Additionally, a claim for attorney’s fees is not a proper subject of a motion for summary adjudication. (See Code Civ. Proc., § 437c, subd. (f)(1); Hindin v. Rust (2004) 118 Cal.App.4th 1247, 1259-60.) Consequently, Defendant seeks summary adjudication of matters that are not authorized. Its motion is improper.

The third issue identified by Defendant, the claim for attorney’s fees, cannot be reframed as a proper subject of a motion for summary adjudication. Yet, with respect to the first and second issues, it appears Defendant actually seeks summary adjudication of the first cause of action on the ground it lacks merit because Plaintiffs cannot establish the essential elements of breach and damages. In other words, the two issues as framed by Defendant are actually just arguments advanced in support of the conclusion that the first cause of action lacks merit and should be summarily adjudicated on that ground.

But upon reframing Defendant’s improper motion as a motion for summary adjudication of the first cause of action, it is unclear what purpose it serves. A defendant moving for summary judgment must demonstrate each and every cause of action and legal theory pleaded lacks merit; unless he or she does so, a court cannot grant a motion for summary judgment. (Lopez v. Super. Ct. (1996) 45 Cal.App.4th 705, 713-14.) Thus, it follows that the purpose of making an alternative motion for summary adjudication is to allow for disposition of individual causes of action, thereby effectuating some savings in trial costs and time, even when a defendant cannot demonstrate every single cause of action and theory pleaded is without merit sufficient to obviate the need for a trial altogether. Where, as here, there is only one cause of action asserted against a defendant, the same burden must be carried for purposes of summary judgment and summary adjudication. In other words, under these circumstances, the two procedures do not actually function as alternatives. It is thus unnecessary to consider whether Defendant is separately entitled to summary adjudication of the first cause of action.

In any event, for the reasons set forth above in the discussion of the motion for summary judgment, Defendant does not carry its initial burden of demonstrating the first cause of action lacks merit.

In conclusion, the motion for summary adjudication is DENIED.