Jones v. Wachovia Bank , 230 Cal. App. 4th 935 ( 2014 )

Filed 9/22/14; pub. order 10/21/14 (see end of opn.)
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH APPELLATE DISTRICT
MARK S. JONES et al., H038382
(Santa Clara County
Plaintiffs and Appellants, Super. Ct. No. 1-09-CV147777)
v.
WACHOVIA BANK et al.,
Defendants and Respondents.
Plaintiffs Mark and Roberta Jones appeal from a judgment of dismissal entered
after the trial court granted defendant Wachovia’s1 motion for summary judgment.
Plaintiffs seek damages under the doctrine of promissory estoppel after losing their home
in a foreclosure sale which they understood from a phone conversation with the bank
would be postponed to a date 10 days after the actual sale date. Because we conclude
that plaintiffs have failed to establish a triable issue of material fact regarding detrimental
reliance or injury under the doctrine of promissory estoppel, we will affirm the judgment.
I. TRIAL COURT PROCEEDINGS
A. THE FIRST AMENDED COMPLAINT
Plaintiffs sued Wachovia over the foreclosure on their San Jose home. Count
three of the first amended complaint-captioned “Damages From Breach of Contract
1
Plaintiffs sued Wachovia Mortgage, FSB and Wells Fargo Bank. In 2009,
Wachovia Mortgage, FSB merged with Wells Fargo Bank, N.A. and became Wachovia
Mortgage, a division of Wells Fargo Bank, N.A. We refer to defendants collectively as
“Wachovia” or “bank” throughout the opinion.
Against WACHOVIA and WELLS FARGO BANK”-alleged that the bank breached an
agreement to postpone the trustee sale and, by reason of that breach, plaintiffs lost their
equity in the property.2 Plaintiffs alleged that in an April 15, 2009 telephone
conversation with Mark Jones, a Wachovia representative agreed to postpone the trustee
sale to June 18, 2009. Plaintiffs further alleged they “had ready funds available to cure
the outstanding default within the time prescribed by law prior to the June 18, 2009,
postponed date of sale, and plaintiffs made preparations to timely submit said funds to
WACHOVIA. Plaintiffs were prevented from doing so by the advancement of the trustee
sale date to June 8, 2009.” Plaintiffs also challenged the trustee sale price of $420,000 as
grossly disproportionate to the value of the home, and claimed damages in lost equity.
B. WACHOVIA’S DEMURRER
Wachovia demurred, arguing that plaintiffs failed to plead the elements of a
breach of contract claim and, to the extent any agreement was oral, it was barred under
both the statute of frauds and the terms of the deed of trust. Plaintiffs responded that the
third cause of action was for breach of contract and promissory estoppel, and further that
the bank’s oral promise was enforceable under the doctrine of promissory estoppel.
Plaintiffs argued further that Civil Code section 2924g, subdivision (c) provided for the
verbal agreement to postpone a sale. The trial court overruled defendants’ demurrer to
count three without discussion.
C. WACHOVIA’S MOTION FOR SUMMARY JUDGMENT
Wachovia moved for summary judgment on count three, advancing several
arguments directed at the breach of contract claim. Wachovia also argued that plaintiffs
did not properly plead promissory estoppel, but even if they had they failed to show a
2
Counts one and two of the first amended complaint sought to set aside the
trustee’s sale and cancel the trustee’s deed. These were dismissed on demurrer and are
not challenged on appeal.
2
promise, detrimental reliance, or injury. Wachovia relied on the following undisputed
facts:
On July 13, 2006, plaintiffs borrowed $495,000 from Wachovia’s predecessor,
World Savings Bank, FSB. The loan was secured by a first deed of trust recorded against
plaintiffs’ home. On June 26, 2008, a notice of default issued by Cal-Western
Reconveyance Corporation (Cal-Western) was recorded in the Santa Clara County
Recorder’s Office showing $9,549 in mortgage arrears.3 After receiving notice of
default, plaintiffs and Wachovia reached a forbearance agreement requiring plaintiffs to
pay $10,000 and bring the loan current by October 27, 2008. Plaintiffs made the $10,000
payment but never brought the loan current.
On January 13, 2009, Cal-Western recorded a notice of trustee sale of plaintiffs’
home. The notice set the sale, by public auction at the Santa Clara County Courthouse,
for January 29, 2009. Wachovia postponed the sale three times at the request of
plaintiffs. At the scheduled January 29 sale, Cal-Western’s auctioneer announced a
postponement to March 3, 2009, and memorialized the postponement in a written
certificate. Plaintiffs did not attend the January 29 sale, but Mark Jones contacted Cal-
Western by phone to confirm the postponement.
At the March 3, 2009 sale, the auctioneer announced the second postponement to
April 17, 2009, and memorialized the postponement in a written certificate. Mark Jones
contacted Cal-Western multiple times through its automated phone system to confirm
that postponement.
According to plaintiffs, during an April 15, 2009 telephone call with Wachovia,
Mark Jones was given a new sale date of June 18, 2009. But at the April 17 sale, the
auctioneer announced the postponement to June 8, 2009 and memorialized that date in
3
Cal-Western was retained by Wachovia as its agent and substitute trustee under
the deed of trust.
3
writing. Plaintiffs did not confirm the new sale date with Cal-Western, despite having
done so for the previous two postponements. Wachovia’s records reflect each
postponement, with the April 17 sale postponed to June 8, not June 18. Each postponed
sale date, including the June 8 date, was publically available online and through Cal-
Western’s automated telephone system.
Plaintiffs requested and received reinstatement quotes from Wachovia in
September 2008, October 2008, and January 2009. Aside from the $10,000 forbearance
payment made in September 2008 with the understanding that plaintiffs would pay the
balance of their default two months later, plaintiffs made no other payments to bring their
loan current. Although plaintiffs had no funds or assets in hand to cure the loan default,
they would have borrowed funds from their accountant and friend, Roger Marlin, to cure
the default before June 18. Marlin had loaned plaintiffs $10,000 for the forbearance
payment, which plaintiffs had not paid back, and he and Mark Jones had discussed
another loan to cure the default. But plaintiffs did not formally seek money from Marlin,
and their discussions were not reduced to a formal agreement. Plaintiffs planned to
contact Wachovia three or four days before June 18 to seek another postponement.
Third party purchaser Adrian Wunderman bought plaintiffs’ home at the June 8
trustee sale for $420,000. At that time plaintiffs’ outstanding debt was $570,147.
Seeking the highest sales price possible, Wunderman, a local real estate broker, listed the
property in August 2009 for $589,950, but he reduced the price by $30,000 after
receiving no purchase offers. According to Wunderman, the house was run down with no
significant upgrades from its original condition. Wunderman undertook cosmetic clean-
up before selling the house, including the removal of stained, flea-infested carpet.
Wunderman received one offer and sold the property for $555,000 on October 22, 2009.
Plaintiffs were living next door to the foreclosed property when it was listed for sale. A
“for sale” sign was posted in the front yard and the listing was available online.
4
Wunderman would have accepted an offer from plaintiffs to repurchase the home for any
amount exceeding $555,000.
D. PLAINTIFFS’ OPPOSITION TO SUMMARY JUDGMENT
Pursuing their third cause of action based on a promissory estoppel theory,
plaintiffs argued that they incurred detriment because, by Wachovia’s “breach of their
promise and advancing the sale date by a period of ten days to June 8, the plaintiffs were
prevented from taking steps to reinstate the loan with [the bank], thereby losing a
significant equity in their home, as well as incurring a significant state and federal
income tax liability by reason of cancellation of debt income.”
Defending their damages claim, plaintiffs submitted a declaration from Gary
Nobile, a realtor who opined that the fair market value of the property in June 2009 was
$695,000, and a declaration from Mark Jones valuing the home at over $700,000 at the
time of the trustee sale. Jones also opined that the $555,000 October 2009 selling price
was substantially below the property’s market value. Plaintiffs also provided a
declaration from Roger Marlin who opined that plaintiffs incurred over $66,000 in
cancellation of debt tax liability. The court sustained Wachovia’s objections to Marlin’s
tax liability figure as irrelevant because no tax damages were alleged in the first amended
complaint. The court also sustained objections to Nobile’s $695,000 fair market value
opinion and Jones’s opinion that the home was valued at $700,000 and undersold at
$555,000.
Plaintiffs responded to defendants’ lack of harm argument by asserting that they
had the right to pay off the loan up to the trustee sale, and that they were prepared to pay
off not only the loan deficiency but the loan in full before June 18. Even though plaintiffs
failed to plead their willingness and ability to pay the loan in full, and even though that
course of action was not explored during discovery, Mark Jones explained in his
declaration supporting plaintiffs’ opposition to summary judgment that he was prepared
to borrow funds from Marlin to pay the entire amount of the loan-in the range of
5
$570,000-if, at the final hour, Wachovia refused to postpone the June 18 sale. Marlin
asserted by declaration that he had told Jones he would do whatever was necessary to
save plaintiffs’ home from foreclosure. Marlin represented further that he had the ability
to pay off plaintiffs’ loan in full in June 2009 and would have done so on 48-hour notice
had Jones asked him.
Jones explained by declaration that plaintiffs intended to seek another
postponement from the bank before resorting to Marlin’s offer, and they planned to make
that request just three or four days before June 18 because Wachovia had advised them to
wait until the scheduled sale date was a few days away before seeking another
postponement. Jones felt it was unnecessary to confirm the June 18 sale date with Cal-
Western since Wachovia had accurately represented the two earlier postponements.
E. TRIAL COURT’S RULING
The trial court granted summary judgment to defendants, concluding that no
written agreement was breached and that any alleged oral agreement was not only barred
by the statute of frauds but also failed for lack of consideration. The court rejected
plaintiffs’ promissory estoppel claim on alternative grounds: A promissory estoppel
claim was not pleaded in the first amended complaint, and plaintiffs failed to demonstrate
estoppel sufficient to overcome the statute of frauds. The court concluded that plaintiffs
failed to plead or show a material change in position resulting in substantial hardship
amounting to unconscionable injury.
II. LEGAL PRINCIPLES
A. NON-JUDICIAL FORECLOSURE
In California, a real property loan generally involves a promissory note secured by
a deed of trust in which the debtor (a home buyer) is the trustor, the creditor (a lending
institution) is the beneficiary, and a neutral third party serves as the trustee. (Nguyen v.
Calhoun (2003) 105 Cal. App. 4th 428, 438.) When a debtor defaults on a loan, the
creditor has the right to invoke the power of sale provided by the deed of trust. (Civ.
6
Code, § 2924, subd. (a).) Civil Code sections 2924a through 2924k provide a
comprehensive and exhaustive framework to exercise the power of sale contained in the
deed of trust. (Nguyen, at p. 438; Residential Capital v. Cal-Western Reconveyance
Corp. (2003) 108 Cal. App. 4th 807, 821.)
The power of sale in a non-judicial foreclosure procedure is exercised by the
trustee. (Nguyen, supra, 105 Cal.App.4th at p. 440.) The trustee must provide the debtor
with written notice of default followed by written notice of sale. (Civ. Code, §§ 2924;
2924.3; 2924b, subds. (b), (f).) The trustee is required to postpone a sale under certain
circumstances, including “mutual agreement [of the trustor and the beneficiary], whether
oral or in writing.” (Civ. Code, § 2924g, subd. (c)(1)(C).) When the trustee postpones a
sale date, it provides notice “by public declaration … at the time and place for the last
appointed sale.” (§ 2924g, subd. (d).) The public declaration “set[s] forth the new date,
time, and place of sale[.]” (Ibid.) No other notice of postponement is required. (Ibid.)
Section 2924g was enacted in 1972, and originally provided for the postponement
of a trustee sale at the discretion of the trustee or the direction of the lender. (Stats. 1972,
ch. 1056, p. 1943, § 4.) The statute was amended in 1979 to require postponement in
other circumstances, including “the mutual agreement, whether oral or in writing, of any
trustor and any beneficiary[.]” (Stat. 1979, ch. 1015, p. 3476, § 4.)
B. THE STATUTE OF FRAUDS AS IT RELATES TO AN ORAL AGREEMENT TO
POSTPONE A TRUSTEE SALE
The statute of frauds is codified in Civil Code sections 1624 (governing contracts)
and 1698 (governing modifications to contracts). A deed of trust is covered by the statute
of frauds (Civ. Code, § 1624, subd. (a)(6)), and an agreement to modify a deed of trust is
governed by Civil Code section 1698 (hereinafter “section 1698”). (Stafford v. Clinard
(1948) 87 Cal. App. 2d 480, 481 [“An agreement to postpone a valid sale of property
beyond the date when said property may be sold under and according to the terms of a
trust deed obviously is an agreement to alter the terms of the instrument.”]; Karlsen v.
7
American Sav. & Loan Assn. (1971) 15 Cal. App. 3d 112, 121 [same].) In Raedeke v.
Gibralter Sav. & Loan Assn. (1974) 10 Cal. 3d 665, 673 (Raedeke) our high court
explained that “a gratuitous oral promise to postpone a sale of property pursuant to the
terms of a trust deed ordinarily would be unenforceable under section 1698.” This is
because the oral promise had not been executed by the parties, as required by section
1698.4
Section 1698, subdivision (d) provides that that section does not preclude “in an
appropriate case the application of [several] rules of law,” including estoppel. (§ 1698,
subd. (d).) Subdivision (d) was included in the 1976 legislation to clarify that section
1698’s revision would not affect related legal principles recognized by then-existing case
law. (13 Cal.L.Rev.Comm.Reports 301, 2129 (1975).)
To estop a defendant from asserting the statute of frauds, a plaintiff must show
unconscionable injury or unjust enrichment if the promise is not enforced. (Estate of
Baglione (1966) 65 Cal. 2d 192, 197.) “ ‘The doctrine of estoppel has been applied where
an unconscionable injury would result from denying enforcement after one party has been
induced to make a serious change of position in reliance on the contract or where unjust
enrichment would result if a party who has received the benefits of the other’s
performance were allowed to invoke the statute.’ ” (Id. at pp. 197-198.)
4
Although Raedeke was decided under former section 1698, which provided “[a]
contract in writing may be altered by a contract in writing, or by an executed oral
agreement, and not otherwise” (former § 1698, enacted 1872, amended by Code. Am.
1873-74, ch. 612, § 193, p. 243), it has equal application to the current version of section
1698, enacted in 1976, which continues to recognize that “a contract in writing may be
modified by an oral agreement to the extent that the oral agreement is executed by the
parties.” (§ 1698, subd. (b); added by Stats. 1976, ch. 109, § 4, p. 171.)
8
C. PROMISSORY ESTOPPEL
California has adopted the Restatement Second of Contracts doctrine of
promissory estoppel: “ ‘A promise which the promisor should reasonably expect to
induce action or forbearance on the part of the promisee … and which does induce such
action or forbearance is binding if injustice can be avoided only by enforcement of the
promise.’ ” (Kajima/Ray Wilson v. Los Angeles County Metropolitan Transportation
Authority (2000) 23 Cal. 4th 305, 310, citing Rest. 2d Contracts, § 90.) The doctrine “
‘employs equitable principles to satisfy the requirement that consideration must be given
in exchange for the promise to be enforced.’ ” (Ibid.) Promissory estoppel binds a
promissor “when he should reasonably expect a substantial change of position, either by
act or forbearance, in reliance on his promise, if justice can be avoided only by its
enforcement.” (Garcia v. World Savings, FSB (2010) 183 Cal. App. 4th 1031, 1041
(Garcia).) “ ‘ “The vital principle is that he who by his language or conduct leads
another to do what he would not otherwise have done shall not subject such person to loss
or injury by disappointing the expectations upon which he acted.” ’ ” (Ibid.) Courts are
given wide discretion in its application. (U.S. Ecology, Inc. v. State of California (2005)
129 Cal. App. 4th 887, 902.) “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.’ [Citation.]” (Id. at p. 901.)
III. STANDARD OF REVIEW
Summary judgment is warranted when there are no triable issues of any material
facts and the moving party is entitled to judgment as a matter of law. (Code Civ. Proc., §
437c, subd. (c); Kahn v. East Side Union High School Dist. (2003) 31 Cal. 4th 990, 1002-
1003.) We review an order granting a motion for summary judgment de novo. (Aguilar
v. Atlantic Richfield Co. (2001) 25 Cal. 4th 826, 860 (Aguilar).)
9
In performing our independent review of a defendant’s summary judgment
motion, “we identify the issues framed by the pleadings since it is these allegations to
which the motion must respond … .” (AARTS Productions, Inc. v. Crocker National
Bank (1986) 179 Cal. App. 3d 1061, 1064 (AARTS Productions). A defendant moving for
summary judgment has the burden of showing that a cause of action lacks merit because
one or more elements of the cause of action cannot be established or there is a complete
defense to that cause of action. (Code Civ. Proc., § 437c, subd. (o); Aguilar, supra, 25
Cal.4th at p. 850.) If a defendant’s moving papers make a prima facie showing that
justifies a judgment in its favor, the burden of production shifts to the plaintiff to make a
prima facie showing of the existence of a triable issue of material fact. (Code Civ. Proc.,
§ 437c, subd. (p)(2); Aguilar at p. 850.)
In determining whether the parties have met their respective burdens, we must “ ‘
consider all of the evidence’ and ‘all’ of the ‘inferences’ reasonably drawn therefrom
[citation] and must view such evidence [citations] and such inferences [citations] in the
light most favorable to the opposing party.” (Aguilar, supra, 25 Cal.4th at p. 843.) A
triable issue of material fact exists “if, and only if, the evidence would allow a reasonable
trier of fact to find the underlying fact in favor of the party opposing the motion in
accordance with the applicable standard of proof.” (Id. at p. 850, fn. omitted.) Thus, a
party “cannot avoid summary judgment by asserting facts based on mere speculation and
conjecture, but instead must produce admissible evidence raising a triable issue of fact.”
(LaChapelle v. Toyota Motor Credit Corp. (2002) 102 Cal. App. 4th 977, 981.) Further,
“counter-declarations, which create immaterial factual conflicts outside the scope of the
pleadings[]” cannot defeat a summary judgment motion; “counter-declarations are no
substitute for amended pleadings.” (AARTS Productions, supra, 179 Cal.App.3d at p.
1065.)
10
IV. DISCUSSION
A. DETRIMENTAL RELIANCE
Plaintiffs argue that the trial court erred by concluding that they failed to show a
triable issue of fact regarding detrimental reliance. According to plaintiffs, “[i]f [they]
had been advised by WACHOVIA that the actual sale date was June 8, 2009, then
plaintiffs would have had sufficient time to obtain the funds to pay off WACHOVIA’S
loan.” Because Wachovia “lull[ed]” plaintiffs into a belief that they had more time to
cure the deficiency, plaintiffs lost the opportunity to cure their default before the actual
June 8 sale date. Plaintiffs rely on Wade v. Markwell & Co. (1953) 118 Cal. App. 2d 410
(Wade) and Garcia, supra, 183 Cal. App. 4th 1031 to support their argument.
In Wade, a defense appeal from a conversion judgment, the plaintiff gave the
defendant a $3,750 mink coat as security for a 30 day $300 loan. “We suggest that you
phone us 24 hours in advance of redemption” was written on the envelope containing the
written pledge agreement. (Wade, supra, 118 Cal.App.2d at p. 422.) The lender
continued to charge interest on the loan after the thirty-day redemption period expired,
and several months later sent the coat owner written notice requesting that she repay the
loan and reclaim the coat. (Id. at p. 417.) The coat owner immediately informed the
lender by telephone that she intended to redeem her coat and asked whether 24-hour
notice was necessary. (Id. at p. 423.) The lender told her such notice was required and
she could make her payment and redeem her coat any time within the following week.
When she presented herself at the lender’s office within that time period, she was told her
coat had been sold and her account closed. (Ibid.)
Wade rejected the defendant lender’s argument that the pledge agreement had
expired and, without consideration, could not be altered orally by the representation that
the coat would be available to claim the following week. Invoking promissory estoppel,
Wade explained that the coat owner, who was prepared to reclaim her coat, “was induced
by defendant’s representations to forbear from immediately redeeming under the
11
assurance that it would be held for her for at least another week,” and that “plaintiff
refrained from exercising her right to redeem in reliance on a promise calculated to
induce such forbearance.” (Wade, supra, 118 Cal.App.2d at pp. 419-420.)
Wade further concluded that the facts of that case gave rise to an equitable
estoppel against applying section 1698 to prevent enforcement of the lender’s oral
modification to the pledge agreement. (Wade, supra, 118 Cal.App.2d at p. 421.)
Specifically, the coat owner was ready to redeem and was misled into believing she had
an extra week in which to do so. (Ibid.) In essence, she was induced by the lender’s oral
representations not to exercise her rights under the pledge agreement while performance
was still possible. (Ibid.)
In Garcia, a lender foreclosed on homeowners’ property after verbally assuring
the homeowners that the trustee sale would not occur as scheduled. (Garcia, supra, 183
Cal.App.4th at pp. 1035-1036.) The homeowners were in the process of refinancing
another property to obtain funds to cure the loan deficiency, and the lender’s agent told
the homeowners three days before the scheduled sale that the sale would not proceed if
the lender knew the refinance would be closing the following week. (Id. at p. 1035.) The
lender had agreed to an earlier postponement after the homeowners had obtained a
written conditional loan approval on the refinance. The day before the scheduled trustee
sale, the homeowners informed the lender’s agents in several voice messages that the
refinance would not close for another week. The refinance closed the following Friday,
and, when the lender rejected their reinstatement payment, the homeowners learned that
the foreclosure sale had proceeded as scheduled. (Id. at p. 1036.)
Reversing summary judgment in favor of the lender on the homeowners’
promissory estoppel claim, Garcia concluded that the homeowners’ “actions in procuring
a high cost, high interest loan by using other property they owned as security were
sufficient to support detrimental reliance[.]” (Garcia, supra, 183 Cal.App.4th at p.
12
1041.) Garcia further noted that neither section 1698 nor the statute of frauds would
defeat the homeowners’ promissory estoppel claim. (Id. at p. 1040, fn. 10.)
Wachovia responds that plaintiffs failed to plead or produce evidence establishing
detrimental reliance. The bank argues that plaintiffs showed no substantial change in
position based on the June 18 sale date. Plaintiffs produced no evidence showing that
they refrained from bringing their loan current in reliance on the June 18 sale date
because they had no ability to do so. According to Wachovia, plaintiffs did nothing to
substantially change their position before their home was sold, and they intended to do
nothing other than to seek another postponement a few days before June 18.
We agree that plaintiffs have failed to show any triable issue regarding detrimental
reliance. Plaintiffs have failed to show that the bank reasonably expected to induce
inaction by the postponement to the June 18 date. In contrast to Wade, where the owner,
prepared to redeem her coat, was induced to forbear based on the lender’s representation
that it would hold her coat for another week, plaintiffs were not induced to forebear any
paying of their deficiency by the postponement of the trustee sale. Plaintiffs were in
default on their loan and, if anything, the postponement was an inducement to cure, not to
remain in default. Even if the postponement were an inducement to forebear payment,
plaintiffs have failed to show a substantial change in position based on the postponement.
(Garcia, supra, 183 Cal.App.4th at p. 1041.) Indeed, their position remained
substantially the same after the third postponement.
Plaintiffs are in a significantly different position than the homeowners in Garcia,
who were reasonably induced by a series of postponements to borrow funds to cure their
default. The Garcia homeowners relied to their detriment on the lender’s oral promise to
continue to refrain from foreclosing when they completed a high cost refinance on
another property to secure funds to cure their default. In stark contrast, plaintiffs took no
similar action and simply hoped that Wachovia would agree to further postponements and
that a loan modification might eventually become available.
13
Plaintiffs presented a new theory in their opposition to summary judgment that
they had arranged with their friend Roger Marlin to pay the entire amount of their loan in
the event the bank refused to postpone the sale a fourth time. We agree with Wachovia
that this theory must be disregarded because it is was not pleaded in the first amended
complaint. (AARTS Productions, supra, 179 Cal.App.3d at p. 1065 [belated assertions
outside the scope of the pleadings are immaterial].) At oral argument plaintiffs urged that
the reference in the governing complaint to curing the “outstanding default” could be
read to include paying off the loan in full. Assuming for the sake of argument that such
language is ambiguous, the allegation would fail for lack of specificity. (Smith v. City
and County of San Francisco (1990) 225 Cal. App. 3d 38, 48.) But even if we were to
consider these facts, they do not establish detrimental reliance. An informal agreement to
borrow money from a friend is not a change of position, much less a substantial change
of position needed to establish an estoppel. Had the sale actually been scheduled for June
18 and had the bank refused a further postponement, that refusal may have induced
plaintiffs to actually borrow funds from Marlin at that time to pay the loan in full. But
plaintiffs’ decision to do nothing before that time reflects no substantial change in
position and fails to establish detrimental reliance.
The facts of this case also are notably different from those in Aceves v. U.S. Bank
N.A. (2011) 192 Cal. App. 4th 218, 222 (Aceves), where the court concluded that a
homeowner’s complaint stated a cause of action for promissory estoppel. The Aceves
homeowner could no longer afford her mortgage and filed for chapter 7 bankruptcy. (Id.
at p. 221.) The homeowner intended to convert her chapter 7 bankruptcy to a chapter 13
proceeding, to enlist her husband’s financial assistance to cure the default, and have her
loan reinstated. (Ibid.) In reliance on the bank’s promise to work with her on a loan
reinstatement, she did not oppose the bank’s motion to lift the automatic bankruptcy stay,
which allowed the foreclosure to proceed. (Ibid.) Instead of working with the
homeowner in an attempt to modify and reinstate her loan, the bank foreclosed on her
14
home. (Ibid.) Unlike the homeowners in Aceves, plaintiffs did not relinquish any legal
right to stay the bank’s foreclosure.
B. INJURY
Wachovia is entitled to summary judgment for the additional reason that plaintiffs
failed to present sufficient evidence of injury (U.S. Ecology, Inc. v. State of California,
supra, 129 Cal.App.4th at p. 901), much less the unconscionable injury needed to avoid
application of the statute of frauds. (Estate of Baglione, supra, 65 Cal.2d at p. 197.)5 In
the first amended complaint, plaintiffs alleged they were prevented from “cur[ing] the
outstanding default within the time prescribed by law prior to the June 18, 2009,
postponed date of sale” because the trustee sale occurred 10 days earlier than promised.
In support of its motion for summary judgment, Wachovia made a showing that the June
8 sale did not cause plaintiffs injury because plaintiffs in fact would not have cured their
default had the sale actually been conducted on June 18. The evidence established that
Mark Jones intended to contact the bank three to four days before June 18 to request
another postponement and, in the event Wachovia refused, Jones would have cured the
default at that time. But plaintiffs could not have cured their default three to four days
before the sale because the statutory right to cure would have expired five business days
before the sale date. (Civ. Code, § 2924c, subd. (e).)
In an effort to overcome Wachovia’s showing, plaintiffs countered by declaration
in support of their opposition to summary judgment that they were prepared to pay the
full loan amount, a recourse that remained available under the statute. (Civ. Code, §
2924c, subd. (b)(1).) Plaintiffs’ belated assertion is immaterial because it is outside the
5
Plaintiffs cite to Civil Code section 2924g as allowing for an oral postponement
of sale. Section 2924g requires the trustee to postpone a foreclosure sale in several
circumstances, including when the lender and borrower orally agree to a postponement.
Section 2924g does not speak to the enforceability of an oral agreement between a lender
and a borrower to postpone a sale, and we reject any suggestion that that section
undermines the applicability of section 1698.
15
scope of the pleadings. (AARTS Productions, supra, 179 Cal.App.3d at p. 1065.)
Plaintiffs’ complaint alleges harm caused by the inability to cure their default, not by the
inability to pay off their loan in full. We are required to review Wachovia’s motion in the
context of plaintiffs’ pleadings. Because of the material distinction between the two
remedies and because plaintiffs did not plead injury by losing their right to pay the loan
in full by June 18, plaintiffs have failed to raise a triable issue of fact regarding injury.
Plaintiffs also have failed to establish damages. (Aceves, supra, 192 Cal.App.4th
at p. 231 [courts may award damages on promissory estoppel claims].) Plaintiffs were
unable to overcome Wachovia’s showing that they held no equity in the home.
Wachovia produced evidence that, just two months after the trustee sale, the home was
listed on the open market for $589,950. After a price reduction, the seller, who sought
the highest price the market would bear, sold the home in October 2009 for $555,000.
The fair market value of the home reflected in the price that a willing buyer paid to a
willing seller in an arm’s length transaction in October 2009 was less than the $570,000
owed by plaintiffs, resulting in negative equity. 6
Plaintiffs did not provide admissible evidence to counter Wachovia’s factual
showing. In his declaration, Mark Jones claimed that the $555,000 sale price was
substantially below the current market value of the home due to demolition conducted by
the seller. The trial court sustained Wachovia’s objection to that opinion testimony for
6
We reject Wachovia’s argument that the $420,000 trustee sale price fixed the
value of the property as of June 8, 2009. Wachovia relied on a passage in Cornelison v.
Kornbluth (1975) 15 Cal. 3d 590, 607 stating “a nonjudicial foreclosure sale, if regularly
held, finally fixes the value of the property therein sold.” But Cornelison was discussing
the value of property in the context of a mortgagee’s action for waste made after a full
credit bid. It was not addressing the fair market value of foreclosed property. (Id. at pp.
606-607.) More recently, and more to the point, the California Supreme Court has
explained that “the price at a foreclosure sale is not deemed the equivalent of the
property’s fair market value” because property sold within the strictures of state-
prescribed foreclosure laws is worth less than property sold pursuant to normal marketing
techniques. (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal. 4th 1226, 1236-1237.)
16
lack of foundation. Plaintiffs claim that the trial court’s evidentiary ruling is error
because Evidence Code section 813, subdivision (a) allows a property owner to testify
regarding the property’s value. But an owner’s right to testify regarding the value of real
property under section 813 is not absolute. (Evid. Code, § 811; Contra Costa Water Dist.
v. Bar-C Properties (1992) 5 Cal. App. 4th 652, 661.) Contrary to plaintiffs’ assertion that
ownership itself supplies foundation under Evidence Code section 813, a property owner
is bound by the same rules of admissibility as any other witness regarding the value of
real property. (Evid. Code, § 814 [requiring a foundation for real property value opinion
based on information “of a type that reasonably may be relied upon by an expert forming
an opinion as to the value of property[.]”];Contra Costa Water Dist., supra, at p. 661; see
also San Bernardino Flood Control Dist. v. Sweet (1967) 255 Cal. App. 2d 889, 898.)
Under Evidence Code section 814, the Jones’ opinion lacked foundation. Thus, the trial
court’s ruling was not an abuse of discretion. (Miranda v. Bomel Construction Co., Inc.
(2010) 187 Cal. App. 4th 1326, 1335 [reviewing summary judgment evidentiary objections
for abuse of discretion]; Shaw v. County of Santa Cruz (2008) 170 Cal. App. 4th 229, 281
[reviewing evidentiary objections for abuse of discretion].)
The trial court also did not abuse its discretion in sustaining Wachovia’s objection
to the declaration of Gary Nobile, a realtor who performed a market analysis of plaintiffs’
foreclosed property. Evidence Code section 816, governing the admissibility of expert
testimony regarding real estate values based on comparable property sales, requires that
such testimony establish that “the property sold must be located sufficiently near the
property being valued, and must be sufficiently alike in respect to character, size,
situation, usability, and improvements, to make it clear that the property sold and the
property being valued are comparable in value and that the price realized for the property
sold may fairly be considered as shedding light on the value of the property being
valued.” In excluding an appraiser’s report setting forth supposedly comparable land
values, In re Marriage of Smith (1978) 79 Cal. App. 3d 725, 752 explained: “A
17
foundation must be laid indicating the other property sold was sufficiently similar to the
property in litigation to indicate ‘the price realized for the other land may fairly be
considered as shedding light on the value of the land in question.’ [Citation.] It must
also appear that the other sale was genuine and sufficiently voluntary to be a reasonable
index of value and that the price was actually paid or substantially secured.”
We agree with the trial court that the Nobile declaration lacked foundation. The
declaration was supported by a report in which Nobile wrote that his $695,000 estimate
for the foreclosed property “is based on not only the average price in the area, but also
making adjustments for condition and location, as is typically done in an appraisal.” The
comparable sales summary attached to the report listed 13 homes sold over a six-month
period. The summary shows the amount each home sold for, with an average sale price
just under the $695,000 figure Nobile used in his report. But the summary does not
identify the home or lot size, character, usability or improvements, as required by
Evidence Code section 816, and we will not assume these foundational requirements
have been met, as plaintiffs urge.
Plaintiffs argue that the trial court erred by excluding evidence of damages in the
form of income tax liability, citing Code of Civil Procedure section 469, which provides:
“No variance between the allegation in a pleading and the proof is to be deemed material,
unless it has actually misled the adverse party to his prejudice in maintaining his action or
defense upon the merits.” Plaintiffs do not dispute that tax consequences of the
foreclosure are special damages that must be pleaded with specificity. (Shook v. Pearson
(1950) 99 Cal. App. 2d 348, 352.) Code of Civil Procedure section 469 does not apply
here because plaintiffs did not allege these damages in the first place. Because the
damages were not pleaded, there can be no variance between the pleading and the proof.
The court did not err by rejecting cancelled debt tax liability damages as insufficiently
pleaded.
18
We uphold the trial court’s exclusion of evidence addressing the tax consequences
of the trustee sale (paragraph 6 of the Marlin declaration) for the additional reason that
unpaid tax liability is speculative. The trustee sale occurred in June 2009, and as of early
2012 plaintiffs had not paid taxes on the $150,147 cancelled debt. It is uncertain whether
plaintiffs will ever pay taxes attributable to the foreclosure sale, and if so, how much they
ultimately would pay. (See Depalma v. Westland Software House (1990) 225 Cal. App. 3d
1534, 1544 [recognizing that inquiring into tax consequences is “necessarily complex and
speculative”].) Accordingly, plaintiffs have failed to establish damages in the form of a
cancelled debt tax liability.
V. DISPOSITION
The judgment is affirmed.
19
____________________________________
Grover, J.
WE CONCUR:
____________________________
Bamattre-Manoukian, Acting P.J.
____________________________
Márquez, J.
Filed 10/21/2014
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH APPELLATE DISTRICT
MARK S. JONES et al., H038382
(Santa Clara County
Plaintiffs and Appellants, Super. Ct. No. 1-09-CV147777)
v.
WACHOVIA BANK et al.,
Defendants and Respondents.
BY THE COURT:
The opinion which was filed on September 22, 2014, is certified for publication.
_____________________________
Grover, J.
_____________________________
Bamattre-Manoukian, Acting P.J.
_____________________________
Márquez, J.
The written opinion which was filed on September 22, 2014, has now been
certified for publication pursuant to rule 8.1105(b) of the California Rules of Court, and it
is therefore ordered that the opinion be published in the official reports.
Dated: ______________________________________
Bamattre-Manoukian, Acting P.J.
Trial Court: Santa Clara County Superior Court
Superior Court No. 1-09-CV147777
Trial Judge: Hon. Kevin E. McKenney
Counsel for Plaintiffs/Appellants: David A. Ryder
Mark S. Jones
Roberta D. Jones
Counsel for Defendant/Respondent: Robert Arthur Bailey
Wachovia Bank
Counsel for Defendants/Respondents: Jeremy E Shulman
Wachovia Bank
Wells Fargo Bank