2018-00241165-CU-BC

The Bank of New York Mellon vs. Emanuel Balalis

Nature of Proceeding: Hearing on Demurrer

Filed By: Nefcy, Duncan M.

Defendants Emanuel and Sunday Balalis’ Demurrer to the Complaint is overruled.

The Bank of New York Mellon (“BoNYM”) alleges that defendants breached a written settlement agreement and the covenant of good faith and fair dealing. BoNYM seeks declaratory relief concerning the interpretation of the agreement.

On June 27, 2006, the Balalises borrowed money secured by the property at 898 San Ramon Way, Sacramento, California 95684. They defaulted on their loan, and their servicer at the time, Bank of America, caused recording of a notice of default in March 2008. In July, 2008 a notice of trustee’s sale was recorded. A foreclosure sale was held August 21, 2008. The loan’s owner, BoNYM, obtained title through a credit bid. A trustee’s deed upon sale was recorded September 4, 2008. (Request for judicial notice, exhibits 1-4.)

Thereafter Bank of America rescinded the default notice and trustee’s deed on January 29, 2011. The Balalises sued for wrongful foreclosure around November 2011 against BoNYM and Bank of America. The parties entered a settlement agreement on February 18, 2016. (Complaint, ¶ 5.) For certain consideration, the Balalises agreed to vacate the property and transfer all rights and marketable title to BoNYM. The parties agreed to effectuate the transfer by rescinding the January 2011 rescission, reinstating the trustee’s deed. (Complaint, 6-10.)

Paragraph 1.E of the settlement agreement states:

[The Balalises] agree [BoNYM] shall cause to be recorded a Rescission of the Notice of Rescission of the Trustee’s Deed Upon Sale recorded on January 19, 2011 as Instrument Number 20110119210 in the Official Records of the Sacramento County Recorder’s Office. The Parties understand and agree that such rescission shall operate to restore title to the Property in the name of The Bank of New York as Trustee for the Certificate Holders of CWABS, Inc., Asset-Backed Certificates, Series
2006-QHl (Complaint, ¶ 6.) Paragraph 2.C provides: “Each Party agrees to take all reasonable steps necessary to effectuate the terms of this Agreement.” (Complaint, ¶ 7.) (emphasis added)

BoNYM alleges that at least one title insurance company deemed the property

uninsurable because the rescission of the rescission of the trustee’s deed upon sale is “not an industry-recognized document.” (Complaint ¶ 10.) Beginning in June of 2017 plaintiff has made efforts to obtain a quit claim deed from defendants to confirm title in BoNYM’s favor, but defendants will not sign the quit-claim deed without additional consideration. (Complaint ¶ 11)

1st cause of action Breach of Contract and 2nd cause of action for Breach of the

Covenant of Good Faith and Fair Dealing:

Overruled.

The elements of a breach of contract claim are: (1) existence of a contract; (2) plaintiffs performance or excuse for nonperformance; (3) defendant’s breach; and (4) damages to plaintiff as a result of the breach. Abdelhamid v. Fire Ins. Exch. (2010) 182 Cal. App. 4th 990, 999.

The covenant of good faith and fair dealing is implied in every contract and “requires that neither party do anything which will deprive the other of the benefits of the agreement.” Gibson v. Gov’t Employees Ins. Co.(1984) 162 Cal. App.3d 441, 445.

The parties agree that the intent of the settlement agreement was to transfer title to BoNYM. The agreement contains a clause that the parties shall “take all reasonable steps necessary to effectuate the terms of this Agreement.” While the agreement does not explicitly state that defendants must execute a quit claim deed in the event that the parties intent to transfer title by the rescission of the rescission document was unsuccessful, the allegation that defendants failure to execute the quit claim deed is sufficient at the pleading stage to allege that defendants have breached the term requiring them to “take all reasonable steps necessary to effectuate the terms of this Agreement.”

Whether or not the execution of a quit claim deed to convey title is a “reasonable step” involves a factual issue that goes beyond the scope of a demurrer.

3rd cause of action Declaratory Relief

Overruled for the reasons stated above.

Defendants to file an Answer on or before January 17, 2019.

The minute order is effective immediately. No formal order pursuant to CRC Rule 3.1312 or further notice is required.

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