Ameri v. JP Morgan Chase Bank CA4/1

Filed 5/17/13 Ameri v. JP Morgan Chase Bank CA4/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
IRAJ AMERI, D060593
Plaintiff and Appellant,
v. (Super. Ct. No. 37-2009-
00103174-CU-BC-CTL)
JP MORGAN CHASE BANK, N.A.,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of San Diego County, Steven R.
Denton, Judge. Affirmed.
Elizabeth E. Comeau and Philip L. Gagnon, Jr. for Plaintiff and Appellant.
AlvaradoSmith, Theodore E. Bacon and Thierry R. Montoya for Defendant and
Respondent.
Iraj Ameri obtained a residential construction loan from Washington Mutual Bank
(WMB). Subsequently, JP Morgan Chase Bank, N.A. (Chase) acquired Ameri's loan.
After Ameri defaulted on various provisions of the loan agreement, Chase instituted
foreclosure proceedings. Ameri sued Chase for breach of contract. As tried under his
third amended complaint, the lawsuit also included causes of action for breach of the
implied covenant of good faith and fair dealing, breach of the duty of commercial
reasonableness, wrongful foreclosure and financial elder abuse. Chase moved for nonsuit
following Ameri's presentation of evidence. The trial court granted the motion and
entered judgment in Chase's favor.
Ameri appeals, challenging a number of the trial court's evidentiary rulings and
claiming he presented sufficient evidence to avoid a nonsuit. Ameri also asserts the court
erred by forcing him to abandon his cause of action for unjust enrichment. We affirm.
FACTUAL & PROCEDURAL HISTORY
On August 30, 2007, Ameri entered into an agreement with WMB to obtain a
$3.42 million residential construction loan secured by a deed of trust recorded against the
property located at 460 Country Club Lane in Coronado. Under the loan agreement,
WMB agreed to advance monies to Ameri to finance the purchase of the property,
demolish the existing residence on the property and to construct a custom home on the
property within 12 months. The loan agreement provided for a scheduled completion
date of August 31, 2008. The loan agreement also included a "time is of the essence"
provision.
Under the agreement, the construction loan would convert to a conventional loan
with amortization through regular monthly payments of principal and interest after the
residence was built. If the construction was not completed by August 31, 2008, or an
2
extended date agreed to by WMB in writing, the bank could declare the construction loan
immediately due and payable. The loan agreement identified the failure to complete
construction before the scheduled completion date as a default. As long as any default
remained, the lender had no obligation to disburse funds under the loan agreement.
Among other things, Ameri agreed to keep the property "free and clear of any and all
liens other than the security interest(s) of Lender. . . ."
After escrow closed, WMB began releasing construction funds to Ameri's general
contractor, which were used to obtain a demolition permit and hire a crew to demolish the
existing structure. The demolition was completed in a timely fashion.
However, WMB stopped disbursing construction funds after it discovered a
competing deed of trust had been recorded on the property by the sellers because Ameri
had defaulted on a $45,000 promissory note.1 In February 2008, WMB placed Ameri's
construction loan in "workout" status, which effectively froze disbursement of funds until
the issue was resolved. In April 2008, WMB formally informed Ameri he was in default
of the construction loan agreement because he had agreed to keep the property free of
liens and had not done so. Further, WMB said it had no obligation to disburse funds as
long as any default existed. WMB told Ameri it would not disburse any further
construction funds until the sellers' lien was removed from the title on the property.
1 Ameri had signed the $45,000 promissory note and the deed of trust to the sellers
one day before he signed the WMB loan agreement. The sellers recorded the deed of
trust on September 4, 2007. In January 2008, the sellers filed a notice of default after
Ameri did not make payments due under the note. Ameri claimed he did not know the
sellers had recorded the deed of trust until he received the notice of default.
3
It took Ameri and his contractor several months to get the sellers of the property to
remove the lien. WMB agreed to disburse $15,600 to Ameri, through an architectural
budget change order, to pay the sellers a compromised amount of $15,000 to reconvey
the sellers' deed of trust to Ameri plus $600 in attorney fees.2 After the sellers were paid
in June 2008 and reconveyed the deed of trust to Ameri, WMB moved Ameri's loan from
"workout" to regular status.
In July 2008, WMB informed Ameri that he was behind in his interest payments
under the construction loan. When the construction loan closed, an interest reserve
account in the amount of $159,030 had been set up to pay for the interest payments as
they became due.3 The reserve account had a remaining balance of $4,358.53, which
was insufficient to pay the $16,617.86 interest payment due on August 1. Ameri said he
did not make interest payments to cure the default because WMB did not assure him that
it would release the loan funds.
Also in July 2008, Ameri asked WMB to extend the scheduled completion date on
the construction loan. In a July 28 letter, WMB said it would grant a three-month
extension to December 1, 2008, for a fee of $25,650. Ameri believed a three-month
extension would not be adequate, and he also questioned the proposed extension fee of
$25,650. Ameri did not accept WMB's three-month extension offer.
2 WMB agreed to this disbursement as a one-time exception to releasing funds
while the loan was in "workout" status.
3 The $159,030 figure was based on the 12-month term of the construction loan
agreement.
4
On August 8, 2008, Ameri and his contractor asked WMB to put $70,000 in the
interest reserve account, which they justified by pointing to construction plan changes
eliminating the planned basement garage and the pool/jacuzzi. These changes were
necessary because the City of Coronado would not approve a basement garage. On
August 13, WMB placed Ameri's loan in the "workout" category to consider that request
as well as the proposed change in the scope of the construction plan. WMB informed
Ameri that it needed to review the new building plans for purposes of obtaining a new
appraisal. Ameri told WMB he did not have money to pay for the new plans. On August
26, 2008, WMB made its second one-time exception to its "workout" policy and
disbursed $8,975 to pay for the new plans. (See fn. 2, ante.)
On August 31, 2008, the construction loan expired. By this date, the only
improvement completed at 460 Country Club Lane was the demolition of the existing
structure. Ameri had not obtained a completed set of approved plans or building permits
for the construction of the residence.
On September 25, 2008, WMB was closed by the Office of Thrift Supervision,
and the Federal Deposit Insurance Corporation (FDIC) was appointed the receiver. The
FDIC, acting as receiver, permitted Chase to acquire certain assets of WMB through a
purchase and assumption agreement (PAA). Pursuant to the PAA, which was dated
September 25, 2008, Chase purchased some of WMB's assets, including Ameri's
construction loan, and assumed the servicing responsibilities for Ameri's loan, which
continued to be in "workout" status.
5
In October 2008, Ameri contacted Christine Symanski, a Chase employee who
was assigned a fact-finding role regarding construction loans that were either delinquent
or going into foreclosure. Symanski's job was to obtain new information from borrowers
in this situation to determine whether Chase should continue with their loans or proceed
with foreclosure. Specifically, Symanski requested Ameri to submit his 2006 and 2007
personal and business tax returns and the two most recent months of asset information.
On November 17, 2008, Symanski e-mailed Ameri that the bank would "not move
forward with releasing funds for [the] construction loan until requested financial
information is provided and account [was] brought current."4
On November 14, 2008, Chase sent Ameri a certified breach letter stating the
loan's maturity date had expired on September 1, 2008. The letter also noted that Ameri's
interest payments on the loan were four months past due. On November 25, 2008, Chase
instituted foreclosure proceedings. On December 18, 2008, Chase recorded a notice of
default and election to sell under the deed of trust.
Also that month, Ameri's attorney demanded Chase withdraw its notice of default
and suggested the matter could be worked out if funds were released and the loan was
amended to a completion date of November 19, 2009. The attorney's letter also stated
Ameri would pay the accrued interest due on the loan out of his separate funds. The
attorney asserted: (1) the building permits could be obtained within 30 days; (2) time to
complete the construction would be approximately 10 months from permitting; (3) a
4 The appraisal for Ameri's project with the new plans was lower than the original
appraisal upon which the construction loan was based.
6
certificate of occupancy could therefore be obtained on or before November 15, 2009;
and (4) construction could be completed with the amount of money left in the unfunded
portion of the loan, which was approximately $1.1 million.
Chase began a risk review process in response to Ameri's request for the loan
extension. On March 9, 2009, a Chase employee started gathering information about the
loan and entered it on a risk review worksheet to "show the current state of the
construction loan." The worksheet was sent to the senior risk committee, which on
March 16, 2009, denied Ameri's request for an extension and recommended the bank
continue with foreclosure. Chase's denial of the extension request was based on the
following factors: Ameri had not built anything on the property, Ameri had not obtained
a building permit, Ameri had managed to complete only 4 percent of the loan's
construction scheduled activities, and Ameri had allowed a competing lien to cloud title.
Chase concluded there was no reasonable basis to presume Ameri would build anything
at any reasonable time in the future.
Chase foreclosed on the property at a public auction on April 28, 2009, in which it
bought the property for $984,000. On May 1, 2009, the substitute trustee recorded a
trustee's deed upon sale.
In granting the nonsuit, the trial court found that Chase was not obligated to grant
Ameri's loan extension request given the lack of approved construction plans and
building permits. The court also ruled Ameri was in material breach of the loan
agreement by failing to start and complete construction within the required times; not
making timely interest payments, as required; and allowing a competing lien to be
7
recorded against the property. "JP Morgan Chase would have been within its legal rights
to declare breach of the agreement and accelerate the loan and institute foreclosure
proceedings based on any of these material breaches," the court said.
DISCUSSION
I. Evidentiary Issues
Ameri contends the trial court erred by (1) allowing Chase to present the
testimony of Daniel C. Steenerson, the seller of the Country Club Lane property; (2)
allowing Stacy Teasdale, a Chase employee who prepared the risk review worksheet, to
give expert opinion derived from inadmissible multiple hearsay; and (3) not allowing
Ameri to testify about the value of his residence in Carmel Valley. We consider these
claims in seriatim.
Steenerson Testimony
Ameri filed a motion to exclude the testimony of Steenerson on the grounds it was
irrelevant to his claim against Chase and prejudicial.5 Ameri's counsel argued the issue
of the Steenerson trust deed was resolved before Chase entered the picture and had
nothing to do with Chase's decisionmaking. The trial court denied the motion, finding
the Steenerson trust deed had direct relevance to the lawsuit because the entire history of
the loan agreement was going to be explored and was potentially relevant for
impeachment. Steenerson was allowed to testify as a defense witness during the
presentation of plaintiff's case-in-chief as an accommodation to the witness.
5 Ameri's motion was entitled "Motion to Preclude the Red Herring Steenerson-
Cured-Junior Lien Issue from being Presented to the Jury."
8
On appeal, Ameri repeatedly argues the Steenerson lien was irrelevant because
Chase did not rely on it when denying his request for a 10-month construction extension
and proceeding with foreclosure. We disagree.
There were numerous factors supporting Chase's decision, including the
Steenerson lien, as shown on the risk review worksheet. The worksheet noted the title
was "clouded, there is a second [deed of trust] of [$]50,000 executed a day before
[WMB] loan, but recorded 18 days after [WMB deed of trust] recording." The preparer
of the worksheet testified the cloud on title was "a huge red flag." "[W]ith construction
loans, you're not allowed to have a second mortgage or second deed of trust on the title.
We require a clean title, period." The preparer also said: "If we give them that
opportunity to clean up that second deed of trust, a lot of times they clean it up, we pull
clean title and they go right back and get another one recorded, so it is a huge red flag for
us."
The existence of the recorded Steenerson deed of trust was a breach/default by
Ameri. Further, Ameri's argument that it was taken care of before Chase became
involved is unavailing because the default was contractually preserved. The construction
loan agreement specifically provided: "Failure or delay by Lender to exercise or enforce
a right, power, or remedy under this Construction Loan Agreement shall not constitute a
waiver of such right, power or remedy under the same." Thus, under the agreement,
Chase could raise any default, at any time, as the reason for foreclosure. Chase did not
waive the default caused by the Steenerson trust deed and properly considered it in
evaluating the extension request and proceeding with foreclosure.
9
Ameri also complains the trial court erred by allowing Chase to present its witness
Steenerson out of order and before establishing the preliminary fact making the testimony
relevant—namely, that Chase relied on the Steenerson lien issue to foreclose. Ameri fails
to demonstrate error.
"The [trial] court in its discretion shall regulate the order of proof." (Evid. Code,
§ 320.) "Motions for . . . calling witnesses out of order[] are largely in the discretion of
the trial court. It must be made to appear very clearly that such discretion has been
abused before [the appellate court] can reverse the trial court's action." (Estate of Lefranc
(1950) 95 Cal.App.2d 885, 887-888.) We find no abuse of discretion in allowing
Steenerson to testify out of order as an accommodation to him.
Ameri's argument about the failure to establish the preliminary fact supporting
Steenerson's testimony is not well taken. The portions of the Evidence Code concerning
preliminary determinations on the admissibility of evidence are contained in division 3,
article 2, at sections 400 et seq. (See particularly Evid. Code, §§ 402-405.) However,
Ameri ignores Evidence Code section 406, which provides: "This article does not limit
the right of a party to introduce before the trier of fact evidence relevant to weight or
credibility." Before Steenerson was called, Ameri testified he never owed Steenerson
any money, Steenerson—not he—had created the problems with his loan, the Steenersons
were "trying to cheat me," and the recording of Steenerson's deed of trust was a dishonest
transaction. Steenerson's testimony was intended, among other things, to impeach
Ameri's credibility. "A party may introduce various types of evidence either impeaching
or supporting a witness's credibility [Evid. Code, §§ 780, 785], or evidence relevant to
10
weight and credibility [Evid. Code, § 406]." (3 Witkin, Cal. Evidence (5th ed. 2012)
Presentation at Trial, § 100, p. 154.) Since Steenerson's impeaching testimony was
admissible under Evidence Code section 406, there was no need to make a preliminary
fact determination.
There was no error.
Teasdale Testimony
Ameri contends Teasdale improperly (1) included expert opinions by her
coworker, Randy Chanadet,6 who provided information and analysis concerning the
property value for input on the risk review worksheet, as well as her own expert opinions,
and (2) included multiple layers of hearsay. Ameri also contends it was error to admit
into evidence exhibit 122, the risk review worksheet. These contentions are without
merit.
Ameri's counsel called Teasdale as a hostile witness pursuant to Evidence Code
section 776. Teasdale prepared the risk review worksheet, which was the basis for
Chase's decision to deny Ameri's request for a contract extension. Teasdale's function
was to gather information about the loan and enter it on the worksheet form, which was
designed to "show the current state of the construction loan." She was not part of the
decision-making process on whether to grant the extension. Further, Teasdale had no
independent recollection of working on Ameri's file.
6 At the time, Chanadet, a California appraiser, and Teasdale were working in
Chase's loss mitigation department at the bank's Denver National Construction Center.
11
Notwithstanding Ameri's arguments, Teasdale did not testify as an expert witness
and did not offer expert opinion testimony. Moreover, Ameri's citations to the record to
show Teasdale provided improper expert opinions—about (1) how the decisionmakers
would assess the worksheet information, (2) the significance of the property's location
near a naval air station, and (3) whether the appraised value was too high—did not elicit
an objection based on improper opinion evidence from Ameri's counsel.7 In order to
preserve a claim of evidentiary error for appellate review, an appellant must make a
contemporaneous and specific objection in the trial court. (Evid. Code, § 353, subd. (a).)
Ameri's failure to object to this evidence forfeits his appellate claim the evidence was
improperly admitted as opinion evidence. (3 Witkin, Cal. Evidence, supra, Presentation
At Trial, § 383, p. 535.)
Ameri also complains that Teasdale's testimony included "generalizations and
speculations of the conduct or situation of other borrowers that have nothing to do with
this case." However, the testimony cited by Ameri to back up this claim was not expert
opinion testimony. Rather, it was properly admitted lay opinion testimony. (Evid. Code,
§ 800.)8
7 Ameri's counsel objected on foundational grounds to a question about how Chase's
decisionmakers would treat information concerning the percentage of construction line
items in the plan that had been completed. Chase's counsel then asked Teasdale a
question to establish the foundation.
8 Evidence Code section 800 provides: "If a witness is not testifying as an expert,
his testimony in the form of an opinion is limited to such an opinion as is permitted by
law, including but not limited to an opinion that is: [¶] (a) Rationally based on the
perception of the witness; and [¶] (b) Helpful to a clear understanding of his testimony."
12
As Ameri correctly notes, at the time Teasdale prepared the risk review worksheet
for Ameri's extension request, she had been preparing such worksheets for Chase for less
than a month. However, Teasdale previously had worked in the banking and mortgage
industry for 10 years, including working as a mortgage loan officer for new construction
loans.
Lay opinion testimony is admissible if it is based on the witness's own perceptions
and personal observations and is helpful to understanding the witness's testimony. (Evid.
Code, § 800; People v. McAlpin (1991) 53 Cal.3d 1289, 1306-1307 & fn. 12.) Teasdale's
testimony at issue in this complaint was based on her long experience in the banking and
mortgage industry and was helpful in describing how banks deal with construction loans.
Such testimony does not call for an expert witness because Teasdale was describing her
work activities and her personal experience. Whether to admit lay witness opinion
testimony rests largely in the trial court's discretion. (Osborn v. Mission Ready Mix
(1990) 224 Cal.App.3d 104, 112.) Appellate courts give broad deference to the trial
court's decision to admit lay opinion testimony that is subject to cross-examination.
(Ibid.) There was no abuse of discretion here.
Ameri also complains the expert opinions of Chandalet, who did not appear at
trial, were improperly admitted through Teasdale's testimony. However, all of Ameri's
citations to the record concerning this issue took place during his counsel's questioning of
Teasdale. Again, the absence of proper objections operates as a waiver or forfeiture of
this issue on appeal. (Evid. Code, § 353, subd. (a).)
13
The real crux of Ameri's contentions concerning Teasdale's testimony is the
admissibility of the risk review worksheet. Bank records are admissible as business
records. (Greenspan v. LADT, LLC (2010) 191 Cal.App.4th 486, 524.) We find the
worksheet was properly admitted under Evidence Code section 1271, the business
records exception to the hearsay rule.9
It is undisputed Teasdale's risk review worksheet was prepared by Teasdale in the
regular course of Chase's consideration of loan modification requests. (Evid. Code,
§ 1271, subd. (a).) Moreover, it is undisputed Teasdale entered the information onto the
worksheet during the week of May 9, 2009, after receiving the request for an extension of
the scheduled completion date for the loan, and the senior risk review committee denied
the request on May 16 after reviewing the worksheet. (Evid. Code, § 1271, subd. (b).) In
her testimony, Teasdale identified the worksheet and described how it was prepared.
(Evid. Code, § 1271, subd. (c).) Teasdale's testimony provided substantial evidence to
the trustworthiness of the sources of information and the procedures employed in
preparing the report. (Evid. Code, § 1271, subd. (d).)
"The key to establishing the admissibility of a document made in the regular
course of business is proof that the person who wrote the information or provided it had
9 Section 1271 provides: "Evidence of a writing made as a record of an act,
condition, or event is not made inadmissible by the hearsay rule when offered to prove
the act, condition, or event if: [¶] (a) The writing was made in the regular course of a
business; [¶] (b) The writing was made at or near the time of the act, condition, or event;
[¶] (c) The custodian or other qualified witness testifies to its identity and the mode of its
preparation; and [¶] (d) The sources of information and method and time of preparation
were such as to indicate its trustworthiness."
14
knowledge of the facts from personal observation." (Jazayeri v. Mao (2009) 174
Cal.App.4th 301, 322.) "The witness need not have been present at every transaction to
establish the business records exception; he or she need only be familiar with the
procedures followed, which [Teasdale] clearly was. (Ibid.)
To the extent Ameri objects to the introduction of the worksheet because
Chandalet provided information and analysis about the property for the worksheet and
was not available as a witness, there was no error. From Teasdale's testimony, it could
reasonably be inferred that the worksheet was prepared in the usual manner and regular
course of Chase's business. "'"In the case of the conduct of the business and affairs of an
establishment, it is presumed that the regular course of business of such establishment is
followed [citation] and the books and records of an establishment truly reflect the facts
set forth in such books."'" (County of Sonoma v. Grant W. (1986) 187 Cal.App.3d 1439,
1451.) The purpose of the business records exception is to eliminate the necessity of
calling each witness involved in preparation of the record, and to substitute the record of
the transaction or event. (Loper v. Morrison (1944) 23 Cal.2d 600, 608-609; County of
Sonoma v. Grant W., supra, at p. 1451.)
Moreover, the evidentiary value of the risk review worksheet was that it was a
document within Chase's records indicating the reasons for its action—denying Ameri's
extension request. Admission of the worksheet did not necessarily show the truth of its
individual components; rather, it showed Chase conducted a review and was offered to
determine whether Chase made an arbitrary decision.
15
Determining whether a proper foundation has been laid for the admission of
business records under Evidence Code section 1271 is within the trial court's discretion
and "will not be disturbed on appeal absent a showing of abuse." (County of Sonoma v.
Grant W., supra, 187 Cal.App.3d at p. 1450; Aguimatang v. Cal. State Lottery (1991) 234
Cal.App.3d 769, 797.) The trial court did not abuse its discretion in admitting exhibit
122, the risk review worksheet.
Limitation on Ameri's Testimony
Ameri contends the trial court erred by not allowing him to testify about the value
of his residence in Carmel Valley. The contention is without merit.
On direct examination, Ameri's counsel asked him the December 2008 value of his
Carmel Valley residence. The trial court sustained Chase's objection to the question on
relevancy grounds.
In a sidebar discussion, Ameri's counsel explained he wanted to explore the equity
Ameri had in this Carmel Valley home to show his client could have supplied additional
security for the construction loan. Counsel further argued that if Chase were actually
concerned about the viability of the construction loan, it would have considered Ameri's
ability to provide additional security. The court found Chase did not have a contractual
duty at that point in time to inquire about other assets owned by Ameri.
Evidence Code section 351 provides: "Except as otherwise provided by statute, all
relevant evidence is admissible." "'Relevant evidence' means evidence, including
evidence relevant to the credibility of a witness or hearsay declarant, having any tendency
in reason to prove or disprove any disputed fact that is of consequence to the
16
determination of the action." (Evid. Code, § 210.) An appellate court examines the
exclusion of evidence on relevancy grounds for abuse of discretion. (City of Ripon v.
Sweetin (2002) 100 Cal.App.4th 887, 900.)
By December 2008 the property was in foreclosure. As a result of Ameri's
counsel's extension request letter, Chase engaged in a risk review to determine at that
point in time whether the loan could be made viable or it was too risky to attempt to do
so. Chase looked at factors, such as the lack of a building permit and the failure to start
building on the property after more than one year, and concluded based on this track
record that it would be too risky. Given the property was in foreclosure at the time,
Chase was not required to look at Ameri's other assets as part of its risk review. The
value of Ameri's other assets, therefore, was not relevant. "No evidence is admissible
except relevant evidence." (Evid. Code, § 350; Brokopp v. Ford Motor Co. (1977)
71 Cal.App.3d 841, 853.)
Moreover, even if evidence of Ameri's other assets was relevant, any error was
harmless. "In civil cases, a miscarriage of justice should be declared only when the
reviewing court, after an examination of the entire cause, including the evidence, is of the
opinion that it is reasonably probable that a result more favorable to the appealing party
would have been reached in the absence of the error." (Huffman v. Interstate Brands
Corp. (2004) 121 Cal.App.4th 679, 692.) Not permitting Ameri to testify about the value
of his Carmel Valley residence did not result in a miscarriage of justice.
17
II. Nonsuit Properly Granted
Ameri contends the trial court erred when it granted Chase's motion for a nonsuit.
The contention is without merit.
A defendant's motion for judgment of nonsuit "is the modern equivalent of a
demurrer to the evidence; it concedes the truth of the facts proved [by the plaintiff], but
denies that they, as a matter of law, sustain the plaintiff's case." (7 Witkin, Cal.
Procedure (5th ed. 2008) Trial, § 406, p. 478.) "A defendant is entitled to a nonsuit if the
trial court determines that, as a matter of law, the evidence presented by plaintiff is
insufficient to permit a jury to find in his favor." (Nally v. Grace Community Church
(1988) 47 Cal.3d 278, 291.) "A trial court may grant a nonsuit only when, disregarding
conflicting evidence, viewing the record in the light most favorable to the plaintiff and
indulging in every legitimate inference which may be drawn from the evidence, it
determines there is no substantial evidence to support a judgment in the plaintiff's favor."
(Edwards v. Centex Real Estate Corp. (1997) 53 Cal.App.4th 15, 27.)
In reviewing the trial court's ruling, we independently view the evidence most
favorably to plaintiff "'resolving all presumptions, inferences and doubts in [his] favor.'"
(Carson v. Facilities Development Co. (1984) 36 Cal.3d 830, 839.) We will uphold the
judgment for respondent only if there is no substantial evidence to support a judgment for
appellant. (Edwards v. Centex Real Estate Corp., supra, 53 Cal.App.4th 15 at p. 28.)
"'Although a judgment of nonsuit must not be reversed if plaintiff's proof raises nothing
more than speculation, suspicion, or conjecture, reversal is warranted if there is "some
substance to plaintiff's evidence upon which reasonable minds could differ. . . ."'
18
[Citation.] In other words, '[i]f there is substantial evidence to support [the plaintiff]'s
claim, and the state of the law also supports that claim, we must reverse the judgment.'"
(Wolf v. Walt Disney Pictures & Television (2008) 162 Cal.App.4th 1107, 1124-1125.)
Ameri claims Chase breached the loan agreement by not granting the extension
request and by foreclosing on the property. The elements of breach of contract are "(1)
the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's
breach, and (4) the resulting damages to plaintiff." (Careau & Co. v. Security Pacific
Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1388.) In an action upon a contract, a
plaintiff must prove either performance or a valid excuse for nonperformance. (Nesson v.
Northern Inyo County Local Hosp. Dist. (2012) 204 Cal.App.4th 65, 87.) "The wrongful,
i.e., the unjustified or unexcused, failure to perform a contract is a breach." (1 Witkin,
Summary of Cal. Law (10th ed. 2005) Contracts, § 847, p. 935.) "[I]t is elementary that
one party to a contract cannot compel another to perform while he himself is in default."
(Lewis Publishing Co. v. Henderson (1930) 103 Cal.App. 425, 429.)
It is undisputed Ameri, at a minimum, committed the following material breaches
of the loan agreement: failed to obtain approved plans and building permits; failed to
complete construction within the scheduled completion date; and failed to pay interest on
19
time as due starting August 1, 2008.10 Further, there was no evidence that either WMB
or Chase played a role in any of these breaches by Ameri.
Ameri's complaint that his construction efforts were stymied because loan
disbursements were suspended for several months is unavailing. WMB was contractually
entitled to suspend disbursements until Ameri cleared the Steenerson lien. Moreover,
neither WMB nor Chase was involved with the City of Coronado's veto of a basement on
the property, which necessitated a change of plans. Ameri may have been a victim of
some unfortunate circumstances—some of his own making and some not—but neither
lender was to blame for these circumstances. "A commercial lender is not to be regarded
as the guarantor of a borrower's success and is not liable for the hardships which may
befall a borrower. [Citation.] . . . [I]n this state a commercial lender is privileged to
pursue its own economic interests and may properly assert its contractual rights."
(Sierra-Bay Fed. Land Bank Assn. v. Superior Court (1991) 227 Cal.App.3d 318, 334-
335.)
Ameri's breach of contract claim fails as a matter of law because he did not
demonstrate that he performed under the contract or was excused from performing; he
10 The trial court also found, among other things, Ameri breached the loan agreement
by granting a security interest in the property to the Steenersons, who recorded their deed
of trust and established a lien on the property. We agree this was a material breach.
Under the loan agreement, Ameri promised the property was unencumbered and free of
all liens. We reject Ameri's arguments that because the breach was cured and no longer a
factor when Chase became involved it was not a material breach. Under the loan
agreement (§§ 9, 13), the lender had the right to raise any default at any time. (See
Storek & Storek, Inc. v. Citicorp Real Estate Inc. (2002) 100 Cal.App.4th 44, 51, fn. 5,
58, fn. 11.)
20
failed to establish all of the elements of a breach of contract by his lenders. (Hamilton v.
Greenwich Investors XXVI, LLC (2011) 195 Cal.App.4th 1602, 1614.)
Ameri's cause of action for breach of the implied covenant of good faith and fair
dealing also failed as a matter of law. Under California law, every contract imposes upon
each party a duty of good faith and fair dealing in the performance of the contract such
that neither party shall do anything which will have the effect of destroying or injuring
the right of the other party to receive the fruits of the contract. (Waller v. Truck Ins.
Exchange, Inc. (1995) 11 Cal.4th 1, 36.) Outside of the insurance context, liability for
breach of the implied covenant of good faith and fair dealing sounds solely in contract,
not in tort. (Cates Construction Inc. v. Talbot Partners (1999) 21 Cal.4th 28, 43-44.)
The implied covenant of good faith and fair dealing is intended to prevent either
party to a contract from unfairly frustrating the other party's right to receive the benefits
of the contract. (Cates Construction Inc. v. Talbot Partners, supra, 21 Cal.4th at p. 43.)
However, our Supreme Court has clarified that an implied covenant of good faith and fair
dealing cannot contradict the express terms of a contract. (Carma Developers (Cal.), Inc.
v. Marathon Development California, Inc. (1992) 2 Cal.4th 342, 373 [scope of conduct
prohibited by implied covenant is limited, and "circumscribed by the purposes and
express terms of the contract"].) A court may not imply a covenant of good faith and fair
dealing that contradicts the express terms of an agreement. (Storek & Storek, Inc. v.
Citicorp Real Estate, Inc., supra, 100 Cal.App.4th at p. 55.) Thus, if the contract gives
the right to one party to do what it did, there can be no breach of the implied covenant.
(Ibid.)
21
Ameri claims Chase breached the implied covenant by not modifying the loan—
i.e., not extending the scheduled completion date—and by foreclosing on the property.
As to Ameri's proposed loan modification, the loan agreement provided:
"If the Residence or Improvements are not completed and the final
advance of the Loan has not occurred prior to the Scheduled
Completion Date or any extended Scheduled Completion Date,
Lender shall have the right to then or thereafter declare the Loan
immediately due and payable. Without limiting the foregoing,
Borrower may request and Lender, in its sole discretion, may grant
an extension of the Scheduled Completion Date pursuant to the
terms of the Construction Loan Addendum to Note. Any such
extension shall be granted pursuant to terms and conditions
acceptable to Lender in its sole and absolute discretion including, but
not limited to, Borrower's payment of an extension fee and execution
of such instruments as the Lender may require. Any extensions of
the Scheduled Completion Date granted by Lender hereunder shall
not require Lender to grant any further such extension."11
11 The pertinent provision in the construction loan addendum to note reads: "Failure
to complete construction . . . prior to the Scheduled Completion Date, shall constitute an
event of default hereunder, under the Security Instrument and under the Construction
Loan Agreement. . . . [O]n a one-time basis only, at Borrower's request, Lender in its
sole discretion may, but shall not be required to, approve an extension of the Scheduled
Completion Date of up to ninety (90) days to facilitate the completion of construction. If
Borrower desires to request such an extension, Borrower shall deliver a written extension
request to the Lender no less than ten (10) days prior to the Scheduled Completion Date.
Any such extension shall be subject to the following conditions: (i) Borrower must
execute a Modification Agreement and such other documentation as Lender may require;
(ii) Borrower must pay to Lender an extension fee equal to [one-fourth percent] of the
face loan amount on the Note for each 30-day period or portion thereof, for which the
extension has been approved, as well as any other costs and expenses associated with the
extension; (iii) Borrower must cause Contractor and/or other third parties to execute such
additional documentation as Lender may require; and (iv) Borrower must obtain for the
benefit of Lender, at Borrower's sole expense, such endorsements to Lender's Policy of
Title Insurance as Lender may require."
22
Under the loan agreement documents, Chase had sole discretion to decide whether
to extend the scheduled completion date. When a contract expressly authorizes a party to
take certain actions, the right to exercise that right is unfettered by the implied covenant
of good faith and fair dealing. (Carma Developers (Cal.), Inc v. Marathon Development
California, Inc., supra, 2 Cal.4th at p. 374.) Rather, the exercise of discretion by the
party is judged by the standard of objective reasonableness. (Storek & Storek, Inc. v.
Citicorp Real Estate, Inc., supra, 100 Cal.App.4th at p. 60.) Chase's decision in May
2009 to deny Ameri's request for a 10-month extension passes any objective reasonable
standard. Not only had there been no construction on the property in 18 months, Ameri
had not secured approved plans or any building permits. The contractor's estimate that
the construction could be completed within 10 months after the building permits were
obtained was speculative at best. Moreover, Ameri, who had committed numerous
breaches of the loan agreement, rejected WMB's offer of a three-month extension of the
completion date, which was the maximum extension time period under the loan
documents. (See fn. 11, ante.) Chase also could reasonably consider Ameri's breach
involving the Steenerson lien. Although Ameri cured this breach, the banking industry
considers any cloud on title a red flag regardless of whether the cloud is removed.
Ameri's claim that Chase breached the implied covenant of good faith and fair
dealing by foreclosing on the property is also misplaced. A lender does not owe a duty of
good faith to forbear from foreclosure when the borrower is in default, regardless of the
hardship that strict enforcement may impose. (Price v. Wells Fargo Bank (1989) 213
23
Cal.App.3d 465, 479, overruled on other grounds in Riverisland Cold Storage, Inc. v.
Fresno-Madera Production Credit Assn. (2013) 55 Cal.4th 1169, 1176-1182.)
Ameri, who was 67 when he entered into the loan agreement with WMB, could
not—as a matter of law—prevail on his cause of action for financial elder abuse under
Welfare and Institutions Code section 15600 et seq. because he did not present evidence
of fraud by Chase.
Welfare and Institutions Code section 15610.30, subdivision (a)(1) provides:
"'Financial abuse' of an elder . . . adult occurs when a person or entity does any of the
following: [¶] (1) Takes, secretes, appropriates, obtains, or retains real or personal
property of an elder . . . adult for a wrongful use or with intent to defraud, or both."12
Ameri argues he demonstrated the fraud element by showing Chase's rush to
foreclose without engaging in a "workout" process and Chase's risk review was
effectively a sham because it did not consider positive information about Ameri's credit
score and his equity in another property. Ameri also refers to testimony by a Chase
employee that Chase was getting out of the construction lending business a point that was
not communicated to him. We are not persuaded.
Regardless of whether Chase used the term "workout," the evidence showed that
Chase employee Symanski attempted to work with Ameri to see if the loan could be
resuscitated. However, that process was frustrated because Ameri did not supply
requested financial information. As to the risk review, which included Ameri's high
12 An elder is defined as "any person residing in this state, 65 years of age or older."
(Welf. & Inst. Code, § 15610.27.)
24
credit score, we disagree with Ameri's characterization. In the face of no approved plans,
no building permits and nothing having been built in one and one-half years, inclusion of
Ameri's equity in another property would almost certainly not have persuaded the senior
risk committee to grant the modification request. Contrary to Ameri's conjectural
argument, the Chase employee's testimony that Chase was getting out of the construction
lending business does not equate with Chase having no intention to service his loan or
any other construction loan. The employee's testimony on this point was not further
developed and could have meant that Chase had decided not to enter into new
construction loan agreements.
Ameri's cause of action for wrongful foreclosure also fails as a matter of law.
Despite Ameri's claims of error in the foreclosure process, he has not shown the errors
were material or caused them prejudice. In Debrunner v. Deutsche Bank National Trust
Co. (2012) 204 Cal.App.4th 433, the plaintiff complained the notice of default was
defective in part because there was no record of a substitution of trustee. The Court of
Appeal held "'a plaintiff in a suit for wrongful foreclosure has generally been required to
demonstrate [that] the alleged imperfection in the foreclosure process was prejudicial to
the plaintiff's interests.'" (Id. at p. 443; Melendrez v. D & I Investment, Inc. (2005)
127 Cal.App.4th 1238, 1258 [presumption that nonjudicial foreclosure sale was
conducted regularly and fairly may be rebutted only by substantial evidence of
"prejudicial procedural irregularity"].) Ameri did not present evidence of prejudice.
Further, notwithstanding the alleged procedural defects, there is no post-sale relief
contemplated in the statute. "There is nothing in [Civil Code] section 2923.5 that even
25
hints that noncompliance with the statute would cause any cloud on title after an
otherwise properly conducted foreclosure sale. We would merely note that under the
plain language of [Civil Code] section 2923.5, read in conjunction with [Civil Code]
section 2924g, the only remedy provided is a postponement of the sale before it happens."
(Mabry v. Superior Court (2010) 185 Cal.App.4th 208, 235.)
Another reason the cause of action for wrongful foreclosure fails is that, as a
general rule, a plaintiff may not challenge the propriety of a foreclosure on his or her
property without offering to repay what he or she borrowed against the property.
(Karlsen v. American Sav. & Loan Assn. (1971) 15 Cal.App.3d 112, 117.) Ameri did not
satisfy the tender rule.
III. Forced Abandonment of Unjust Enrichment Cause of Action
During a pretrial hearing on the parties' motions in limine, the trial court
announced it was going to conduct a bench trial on the equitable causes of action in
Ameri's third amended complaint before the jury trial began. As a result, Ameri's counsel
dismissed his cause of action for unjust enrichment.
Ameri contends the trial court abused its discretion by forcing him to elect to
proceed first with his unjust enrichment cause of action as an equitable action. The
contention is without merit.
There is no cause of action for unjust enrichment in California. (McKell v.
Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1490.) "Rather, unjust
enrichment is a basis for obtaining restitution based on quasi-contract or imposition of a
constructive trust." (Ibid.) "The phrase 'Unjust Enrichment' does not describe a theory of
26
recovery, but an effect: the result of a failure to make restitution under circumstances
where it is equitable to do so." (Lauriedale Associates, Ltd. v. Wilson (1992)
7 Cal.App.4th 1439, 1448.)
"'"In determining whether the action was one triable by a jury at common law, the
court is not bound by the form of the action but rather by the nature of the rights involved
and the facts of the particular case—the gist of the action. A jury trial must be granted
where the gist of the action is legal, where the action is in reality cognizable at law."'
[Citations.] On the other hand, equitable issues are to be resolved by the court sitting
without a jury. [Citations.] 'Where legal and equitable issues are joined in the same
action the parties are entitled to a jury trial on the legal issues.' [Citations.] Ordinarily,
'the equitable issues are [to be] tried first and then, if any legal issues remain, a jury may
be called.'" (Arciero Ranches v. Meza) (1993) 17 Cal.App.4th 114, 123-124.)
Ameri's third amended complaint contained both legal and equitable issues. The
trial court did not abuse its discretion by deciding to hear the equitable issues first.
Ameri's case authority (Lectrodryer v. SeoulBank (2000) 77 Cal.App.4th 723, 726) does
not stand for the proposition that a jury can decide equitable issues.13
13 Ameri's reliance on Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th
872 during oral argument is unavailing. The case is readily distinguishable on a number
of points and is not helpful or persuasive as to this case.
27
DISPOSITION
Judgment is affirmed.
NARES, J.
WE CONCUR:
McCONNELL, P. J.
IRION, J.
28