The Court of Appeal of the State of California, Fourth Appellate District, recently affirmed the trial court's dismissal of a case involving the borrowers' default on two home mortgage loans, because the borrowers failed to adequately allege the existence of an enforceable agreement to modify their loans, and did not adequately allege that the lender defendants failed to comply with the statutory requirements for conducting a nonjudicial foreclosure.
The Court also affirmed the trial court's order denying leave to amend because the borrowers failed to specifically show how they could amend their pleading to state a cause of action. Finally, because the Court affirmed the dismissal of the action, it also dismissed as moot the borrowers' petition for writ of mandate to prevent the lender defendants from evicting them from their home during the appeal.
A copy of the opinion is available at: http://www.courts.ca.gov/opinions/documents/G047028.PDF.
Specifically, the Court of Appeal held:
(1) the borrowers failed to properly allege a claim under California Civil Code section 2923.5, because their own allegations indicated that the lender contacted them more than thirty days before the notice of default was recorded, as required;
(2) the borrowers failed to properly state a claim under California Civil Code section 2924, because a substitute trustee may record a notice of default before a notice of substitution of trustee is recorded, and furthermore the notice of default could not be considered invalid under section 2932.5 because this section only applies to mortgages, not deeds of trust; and the borrowers failed to properly state a claim under 2924 because they failed to allege not only that the substitute trustee was not the trustee under the applicable deed of trust, but also that it was not the agent of the trustee;
(3) the borrowers' purported fraud claim alleging the lender promised to modify their loan failed because the borrowers failed to allege that the parties entered into a loan modification agreement, as required under the statute of frauds, and because the borrowers failed to sufficiently allege reliance upon the lender's misrepresentations and that they were damaged based upon these misrepresentations; further, the Court of Appeal found that the exception to pleading fraud with specificity where the defendant had full information of the purported fraud did not apply with respect to the elements of reliance and damages, because the lender would have learned this information from the borrowers;
(4) the borrowers failed to state a claim under California's Unfair Competition Law ("UCL"), Business and Professions Code section 17200, because they cited no authority showing what is required to allege a fraud claim under the UCL and made no attempt to explain how their allegations adequately stated such a claim and were deemed waived;
(5) the borrowers' breach of contract claim failed as a matter of law because the borrower failed to allege the parties entered into a signed, written agreement to modify their loans, as required by the statute of frauds;
(6) the borrowers claims for declaratory relief failed to state a claim because the borrowers did not meet their burden, they did not address what was required to state a declaratory relief or quiet title claim, and the borrowers provided no explanation regarding how these cases show the trial court erroneously sustained the demurrer to these causes of action; and
(7) the borrowers' request for leave to amend was denied because the borrowers failed to "clearly and specifically" set forth the legal authority for their claims, the elements of those claims, and the facts supporting each of those elements.
Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
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Email: RWutscher@mwbllp.com
Admitted to practice law in Illinois
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