Case Number: VC063856    Hearing Date: July 10, 2014    Dept: SEC

GUERRERO v. BANK OF AMERICA
CASE NO.: VC063856
HEARING: 07/10/14

#10
TENTATIVE ORDER

Defendant BANK OF AMERICA, N.A.’s demurrer to the First Amended Complaint is OVERRULED as to the 4th and 7th causes of action; and otherwise SUSTAINED WITHOUT LEAVE TO AMEND. C.C.P. § 430.10(e).

Defendant has 20 days within which to serve and file a responsive pleading.

As alleged, plaintiff PATRICK GUERRERO refinanced the loan on his residential real property, and the Deed of Trust was recorded in October 2006. Comp., Exh. A. He alleges that defendant failed to disclose that the loan was a negative amortization loan with an adjustable interest rate. ¶¶10, 12. Plaintiff alleges that his 2012 change in financial circumstances “entitled [him to] a good faith review and consideration for a loan modification.” ¶13.

Plaintiff allegedly submitted a loan modification application in January 2013, which he withdrew in April 2013. Comp., ¶16-23. He submitted a second application in October 2013, and was notified in November 2013 that he was not eligible for a modification. ¶¶25-28. Plaintiff is essentially seeking monetary damages related to defendant’s undue delay and failure to timely process those applications, and for alleged wrongdoing related to the loan itself. Defendant demurs to each of the causes of action.

1st —violation of C.C. §2923.7
Plaintiff alleges a violation of section 2923.7 which provides that defendant furnish a borrower with a single point of contact. He alleges that he was he requested one in January 2013 and was given one, but that the contact did not communicate with him. FAC, ¶¶16, 39. Plaintiff alleges that defendant did not act in good faith. ¶40.

Defendant argues that the statute does not apply because plaintiff was current on his loan as of November 2013. ¶28. Subsection (c) of the statute requires a single point of contact until the “account becomes current.” Plaintiff is seeking damages from January 2013. However, he alleges that he was, in fact, given a single point of contact, which is broadly defined in the statute. C.C. § 2923.7(e).

Additionally, plaintiff proffered no authority that the statute provides for a civil penalty, rather than merely injunctive relief to enjoin foreclosure actions until the violation is remedied. See C.C. § 2924.12. The demurrer is sustained without leave to amend because there are no actionable damages sought.

2nd—violation of C.C. § 2924.10
Plaintiff alleges that defendant failed to provide a written acknowledgment of receipt of his loan modification documents within 5 days of receipt, in violation of the statute. Although the body of the pleading references section 2923.7, the face page of the FAC identifies the proper statute.

It is not clear from the allegations whether a completed loan modification was received in April 2013 prior to plaintiff’s withdrawal of the application. In connection with the second application, plaintiff alleges that he received a letter of receipt. FAC, ¶26.

Plaintiff did not identify the statutory basis for “civil penalties” sought in connection with the alleged violation. FAC, ¶46. It does not appear that there is a remedy other than injunctive relief. C.C. § 2924.12. For that reason, the demurrer is sustained without leave to amend.

3rd—breach of contract
Plaintiff has not alleged facts to support a breach of the loan contract. He contends that defendant violated paragraph 14, which states that if the loan is subject to maximum loan charges and the law is interpreted so that the loan exceeds the permitted limits, than the lender must reduce the charge to the permitted limit or lower the principal. Plaintiff did not attach to his pleading the Adjustable Rate Rider which is part of the Deed of Trust or otherwise allege that the amounts charged to him “exceed the permitted limits.” The FAC is silent as to the actual terms of the rider.

Plaintiff has not alleged that the loan violated Finance Code section 4973(c), as he signed the Deed of Trust (Exhibit A) which expressly references the adjustable rate, and thus the terms of the loan were properly disclosed.

It does not appear plaintiffs breach of contract claim is premised on a viable theory. The demurrer is sustained without leave to amend.

4th breach of implied covenant of good faith
The breach of implied covenant of good faith cause of action, to the extent plaintiff alleges defendant owed plaintiff a duty to modify, fails. See Carma Developers, Inc. v. Marathon Develop. Calif., Inc. (1992) 2 Cal.4th 342; see also Jenkins v. JPMorgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497.

However, plaintiff contends that by delaying the loan modification application process, defendant acted in bad faith and prevented plaintiff from performing, resulting in his falling behind on the loan. FAC, ¶64. The delay also prevented plaintiff from timely correcting his ineligibility (or the application itself), thereby causing him damages in the form of arrears and late penalties. ¶67. Those damages are beyond those sought in Lueras v. BAC Home Loan Servicing, LP (2013) 221 Cal.App.4th 49, 79 (disallowing recovery for “time and effort spent assembling materials for an application to modify a loan” as de minimus damages). The alleged facts are sufficient to support the cause of action.

5th—negligent misrepresentation
6th—negligence
Generally, a lender does not owe a duty of care to its borrower. Nymark v. Heart Federal Sav. & Loan Ass’n (1991) 231 Cal.App.3d 1089. Plaintiff has not alleged facts suggestive of anything other than a typical relationship, and thus the demurrer is sustained for lack of duty. Lueras, supra.

7th–unfair business practices
Because plaintiff has stated a claim for breach of the implied covenant of good faith and fair dealing, the Court finds that he can properly maintain the cause of action for violation of Business and Professions Code 17200 et seq. He has alleged injury in fact by virtue of his payment of late fees and penalties which could have otherwise been avoided had defendant acted in good faith or in a “fair” manner to ensure the loan modification application was timely processed. ¶97; see Camacho v. Auto Club of Southern Calif. (2006) 142 Cal.App.4th 1394. The demurrer is overruled.