Nunn v. JPMorgan Chase Bank CA1/4

Filed 5/13/16 Nunn v. JPMorgan Chase Bank CA1/4
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION FOUR
GERALD L. NUNN et al.,
Plaintiffs and Appellants,
A139718
v.
JPMORGAN CHASE BANK, N.A.1 et al, (Napa County
Super. Ct. No. 2656767)
Defendants and Respondents.
Gerald L. Nunn and Judith Nunn brought an action against respondents JPMorgan
Chase Bank, N.A. (Chase) and California Reconveyance Company (CRC) alleging
irregularities in the processing of their requests for loan modification. They appeal
following the court’s entry of summary judgment in favor of respondents. We conclude
that there is a triable issue of fact as to whether the Nunns complied with the terms of a
trial plan agreement (TPA) for loan modification. We also conclude that the Nunns can
allege a cause of action for negligence based on respondents’ obligation to exercise due
care in the processing and review of their loan modification application. We therefore
remand the matter for further proceedings.
I. FACTUAL BACKGROUND
The Nunns are the owners of a property on Seminary Street in Napa. In July 2006,
they refinanced their mortgage through Washington Mutual Bank, F.A. (WaMu) in the
1
The Nunns erroneously sued JPMorgan Chase Bank, N.A. as J.P. Morgan Chase
& Company.
1
amount of $900,000. They obtained approximately $200,000 in cash out from the
transaction. They used $100,000 of that cash to purchase a Napa property on El Monte
Way for $880,000.2
The WaMu mortgage was a negative amortization loan in which paying only the
minimum monthly payments resulted in an increase to the principal balance. In August
2008, the minimum monthly payment increased from $2,876.80 to $4,286.23. The
Nunns defaulted on the loan by failing to make their September 2008 payment.
By October 2008, the Nunns were in communication with Chase3 regarding a loan
modification application. On January 28, 2009, the Nunns submitted a request to Chase
for a loan modification. On July 28, 2009, they signed a TPA with Chase under which
they agreed to make three payments of $3,767.74 in each of three consecutive months
beginning on August 1, 2009. The Nunns made the first payment on July 31, 2009, but
did not make the second and third payments until the first week of November 2009.
Chase continued to process the Nunns’ loan modification application and
requested additional documentation. On March 5, 2010, Chase notified the Nunns that
they were ineligible for the Home Affordable Mortgage Program (HAMP) or other loan
modification programs offered by Chase due to the net present value (NPV) calculation.4
In July 2010, the Nunns reapplied for a loan modification through the HAMP
program. On August 16, 2010, Chase again denied their request finding that they did not
qualify for a modification because the current unpaid principal balance on their loan was
higher than the program limit. The Nunns submitted yet another request for a loan
2
The Nunns’ mortgage on the El Monte Way property is the subject of another
appeal pending between the parties, Nunn v. JP Morgan Chase Bank, N.A. (A146419).
3
Chase purchased the WaMu mortgage on or about September 25, 2008 pursuant
to a Purchase & Assumption Agreement entered into with the Federal Deposit Insurance
Corporation (FDIC).
4
The NPV calculation is “ ‘ “essentially an accounting calculation to determine
whether it is more profitable to modify the loan or allow the loan to go into foreclosure.”
[Citation.]’ ” (West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 787
(West).)
2
modification but it, too, was denied on November 19, 2010. Chase also denied this
request on the ground that the current unpaid principal balance on the loan exceeded the
program limit.
The Nunns continued to seek a loan modification, and in January and February
2011, Chase requested additional documentation to consider the request. On April 7,
2011, Chase denied the Nunns’ request on the ground that they did not provide the
requested documents.
On April 21, 2011, CRC recorded a notice of default on the property, indicating
that the Nunns owed back payments of $146,029.04 as of April 15, 2011.
On April 17, 2011, the Nunns sought reconsideration of Chase’s denial of the loan
modification. Chase’s phone logs for May and July 2011 indicate that the Nunns’ loan
modification was still being evaluated. Ultimately, Chase never completed the evaluation
because the Nunns filed this action on August 3, 2011.
The Nunns’ complaint sought injunctive and declaratory relief and damages for
several causes of action including misrepresentation, fraud and deceit, quiet title,
negligence, and negligent and intentional infliction of emotional distress. The court
sustained Chase’s demurrer to the complaint and a first amended complaint was filed on
December 5, 2011 alleging the same causes of action. In their negligence and negligent
infliction of emotional distress causes of action, the Nunns alleged that respondents
engaged in “dual tracking”—evaluating their application for a loan modification while
pursuing foreclosure—and that respondents failed to exercise due care in evaluating their
application, told them to forgo making mortgage payments, and then used their default to
begin foreclosure. Respondents demurred to the first amended complaint. The court
sustained, without leave to amend, the demurrer to the following causes of action:
declaratory relief and quiet title, negligence, negligent infliction of emotional distress,
and violation of Civil Code section 1788.17 (false representations in the servicing and
collection of debt by the debt collector). The court overruled the demurrer to the
remaining nine causes of action.
3
On April 11, 2013, respondents moved for summary judgment contending that
there were no triable issues of fact; they contended the evidence showed they did not
engage in any wrongdoing and that they did not owe the Nunns any duty with respect to
their claim for negligent infliction of emotional distress. In support of their motion,
respondents submitted a declaration from Araceli Urquidi, a senior research specialist for
Chase, which attached numerous documents from the Nunns’ loan file. Respondents also
submitted a declaration from their attorney authenticating discovery responses and
excerpts of depositions. The Nunns opposed the motion, offering evidence that their
signatures on the deed of trust and promissory note were forged, and arguing that
respondents were negligent, breached their fiduciary duties, misrepresented facts,
committed fraud, and breached the covenant of good faith and fair dealing. The Nunns
also presented evidence and argument that respondents intentionally inflicted emotional
distress and violated unfair competition laws.
The trial court granted summary judgment, finding that the Nunns’ forgery claim
was barred because they did not allege that claim in their complaint. With respect to their
remaining causes of action, the court concluded that the Nunns: (1) failed to submit
evidence to support their argument that Chase did not acquire interests in the deed of trust
or promissory note; (2) failed to submit any evidence of harm “beyond simply being
distressed” on their claim for intentional infliction of emotional distress; (3) failed to
submit any evidence regarding damages on their claim for breach of the implied covenant
of good faith and fair dealing; (4) failed to submit evidence, on their cause of action for
promissory estoppel, or on their claims that their credit was harmed and that they forwent
bankruptcy protections or alternative lending opportunities; (5) failed to show a triable
issue with respect to damages or causation on their fraud and unfair competition claims;
and (6) failed to show they were entitled to injunctive relief.
II. DISCUSSION
A. Standard of Review
The standard of review of a summary judgment motion in favor of a defendant is
well settled. We review the trial court’s ruling de novo. (Barber v. Chang (2007) 151
4
Cal.App.4th 1456, 1462–1463.) We “independently assess the correctness of the trial
court’s ruling by applying the same legal standard as the trial court in determining
whether any triable issues of material fact exist, and whether the defendant is entitled to
judgment as a matter of law.” (Rubin v. United Air Lines, Inc. (2002) 96 Cal.App.4th
364, 372.) “There is a triable issue of material fact if, and only if, the evidence would
allow a reasonable trier of fact to find the underlying fact in favor of the [plaintiff] in
accordance with the applicable standard of proof.” (Aguilar v. Atlantic Richfield Co.
(2001) 25 Cal.4th 826, 850, fn. omitted (Aguilar).) The trial court must view that
evidence, and any reasonable inferences from that evidence, “in the light most favorable
to” the plaintiff. (Id. at p. 843.)
Thus, in considering a motion by a defendant, “we determine with respect to each
cause of action whether the defendant seeking summary judgment has conclusively
negated a necessary element of the plaintiff’s case, or has demonstrated that under no
hypothesis is there a material issue of fact that requires the process of trial . . . .“ (Guz v.
Bechtel National, Inc. (2000) 24 Cal.4th 317, 334.) A defendant has met his burden of
showing that a cause of action has no merit if he shows that one or more elements of the
plaintiff’s cause of action cannot be established. (Aguilar, supra, 25 Cal.4th at p. 849.)
Once the defendant carries that burden, the burden shifts to the plaintiff to show the
existence of a triable issue of material fact. (Ibid., see Hawkins v. Wilton (2006) 144
Cal.App.4th 936, 940; Binder v. Aetna life Ins. Co. (1999) 75 Cal.App.4th 832, 840
[responding plaintiff has no evidentiary burden unless moving defendant has first met
initial burden].) In order to meet its burden on a claim for which the plaintiff would have
the burden of proof by a preponderance of the evidence, “the defendant must present
evidence that would preclude a reasonable trier of fact from finding that it was more
likely than not that the material fact was true [citation], or the defendant must establish
that an element of the claim cannot be established, by presenting evidence that the
plaintiff ‘does not possess and cannot reasonably obtain, needed evidence.’ ” (Kahn v.
East Side Union High School Dist. (2003) 31 Cal.4th 990, 1003; and see Aguilar, supra,25 Cal.4th at p. 850.)
5
“ ‘A different analysis is required for our review of the trial court’s . . . rulings on
evidentiary objections. Although it is often said that an appellate court reviews a
summary judgment motion “de novo,” the weight of authority holds that an appellate
court reviews a court’s final rulings on evidentiary objections by applying an abuse of
discretion standard. [Citations.]’ [Citation.]” (Miranda v. Bomel Construction Co., Inc.
(2010) 187 Cal.App.4th 1326, 1335 (Miranda); accord, Serri v. Santa Clara University
(2014) 226 Cal.App.4th 830, 852.) A trial court abuses its discretion only when it
exceeds the bounds of reason. (DiCola v. White Brothers Performance Products, Inc.
(2008) 158 Cal.App.4th 666, 679.) We consider and construe liberally only admissible
evidence in deciding whether there is a triable issue of fact. (Bozzi v. Nordstrom, Inc.
(2010) 186 Cal.App.4th 755, 761.)
B. Evidentiary issues
In support of their summary judgment motion, respondents submitted a request for
judicial notice of the deed of trust on the property, the purchase and assumption
agreement, the notice of default and election to sell under the deed of trust on the
property, the notice of trustee’s sale, and the deed of trust, assignment of deed of trust,
and notice of default and election to sell for the El Monte Way property. Respondents
also submitted the Urquidi declaration attaching and identifying documents from the
Nunns’ loan file. The Nunns contend that the trial court abused its discretion in granting
respondents’ request for judicial notice and admitting the Urquidi declaration.
First, the Nunns assert that the court improperly considered as true the statements
contained in the documents of which it took judicial notice. As explained in Fontenot v.
Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256 (Fontenot), disapproved on other
grounds in Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919, 924,
pursuant to Evidence Code section 452, subdivisions (c) and (h), courts may take judicial
notice of recorded real property documents, including deeds of trust. “The official act of
recordation and the common use of a notary public in the execution of such documents
assure their reliability, and the maintenance of the documents in the recorder’s office
makes their existence and text capable of ready confirmation, thereby placing such
6
documents beyond reasonable dispute.” (Id. at pp. 264–265.) Courts take judicial notice
not only of the existence and recordation of recorded documents but also of the matters
that can be deduced from the documents. (Id. at p. 265.) Thus, while recognizing that it
is improper to take judicial notice of the truth of statements of fact recited in documents,
the court in Poseidon Development, Inc. v. Woodland Lane Estates, LLC (2007) 152
Cal.App.4th 1106, 1117–1118, took judicial notice of the legal effect of the language in
recorded documents in a real estate transaction. Similarly, in McElroy v. Chase
Manhattan Mortgage Corp. (2005) 134 Cal.App.4th 388, 394, the court took judicial
notice of the date of the recordation of a notice of default, and the amount stated as owing
in the notice. Hence, in the present case, the court did not abuse its discretion in taking
judicial notice of the existence of and the date of the recorded documents.
The Nunns next argue that the trial court abused its discretion in admitting the
Urquidi declaration because it is hearsay and the declarant did not adequately establish
her credentials to satisfy the business records exception. We disagree. Urquidi declared
that the information contained in the declaration was true and correct to the best of her
knowledge and that she was competent to testify to that information. (See Herrera v.
Deutsche Bank National Trust Co. (2011) 196 Cal.App.4th 1366, 1376.) She also
established the foundational elements for the business record exception to the hearsay
rule.5
Bank records are generally admissible as business records. (Greenspan v. LADT
LLC (2010) 191 Cal.App.4th 486, 524.) Here, Urquidi asserted in her declaration that
she was a “Sr. Research Specialist” for Chase and had signing authority as an Assistant
Secretary. She stated she had reviewed the business records attached to the declaration
5
Evidence Code 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.”
7
and had access to the records maintained by Chase as part of her job responsibilities.6
These responsibilities included reviewing loan origination files, loan histories, collateral
files containing endorsed copies of promissory notes and deeds of trusts, correspondence
histories, foreclosure files and recorded notices, and loss mitigation files. She further
stated that the records were “prepared and/or received in the ordinary course of the
respective business of Chase [and that each] of the documents was made or received at or
near the time of the occurrence or events they record.” She thus established the
foundational elements for the business record exception in that she provided the sources
of the information and the manner and time of preparation which demonstrated
trustworthiness. (Evid. Code, § 1271, subd. (d).)
The Nunns argue that the Urquidi declaration is hearsay because the declarant
lacks personal knowledge of the matters contained in the declaration and was not the
custodian of records. Chase was not required to submit a declaration by its custodian of
records in order to gain admissibility of the business records. The business records
statute permits any qualified witness to establish the conditions of admissibility. (Evid.
Code, § 1271, subd. (c).) “It is the object of the business records statutes to eliminate the
necessity of calling each witness, and to substitute the record of the transaction or event.”
(Loper v. Morrison (1944) 23 Cal.2d 600, 608–609.) “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 . . . .” (Jazayeri v. Mao (2009) 174
Cal.App.4th 301, 322.) Urquidi established that she had reviewed the documents and
was familiar with the loan and foreclosure procedures. Her declaration thus met the
conditions of admissibility for business records. (Ibid.)
6
In light of this statement in the declaration, the Nunns’ argument that the
declaration did not state that Urquidi was an employee of Chase is specious. In addition,
Urquidi was not required to show that she was employed by Chase at the time the loan
transactions occurred. (See County of Sonoma v. Grant W. (1986) 187 Cal.App.3d 1439,
1449 [laboratory report authenticated by witness familiar with blood collection
procedures even though technician who performed tests was not called as a witness].)
8
Finally, the Nunns challenge the Urquidi declaration’s inclusion of the purchase
and assumption agreement drafted by the FDIC, the notices of default, and the notices of
trustee’s sale which were prepared by CRC. As we have already discussed, the court
properly took judicial notice of these documents. (See Fontenot, supra, 198 Cal.App.4th
at p. 265.) That they were also available as attachments to the Urquidi declaration is
irrelevant.
C. Forgery
The Nunns next contend that the trial court erred because it refused to consider the
claim that their signatures on the deed of trust and on the promissory note were forged.
They argue that respondents could not proceed with foreclosure because they were not
proceeding under a deed of trust and promissory note that were valid. This argument
fails as the Nunns acknowledged in their verified first amended complaint that this action
involved “their deed of trust.” In addition, the signatures on the deed of trust were
notarized. The notary’s acknowledgement is prima facie evidence that the Nunns signed
the deed of trust. (Evid. Code, § 1451.) Further, the Nunns testified that they signed the
deed of trust but could not verify that it was their signature on the document at their
depositions. It is simply disingenuous of them to claim that their signatures are forged on
a deed of trust and loan which have been in existence since 2006, and which the parties
have relied upon in the loan transaction at issue.
Moreover, the Nunns’ claim is barred because they did not plead a cause of action
for forgery in their complaint and raised this claim only at the eleventh hour in opposition
to respondents’ motion for summary judgment. Indeed, their first amended complaint
was premised on the allegations that they were entitled to relief based on the loan and
deed of trust they now claim contains their forged signatures. Commercial Code section
3308 provides that “[i]n an action with respect to an instrument, the authenticity of, and
authority to make, each signature on the instrument is admitted unless specifically denied
in the pleadings.” The Nunns argue that this provision is inapplicable because the
Commercial Code does not apply to deeds of trust or foreclosures. They are mistaken.
While we recognize that “ ‘[t]he comprehensive statutory framework established in [Civil
9
Code sections 2924–2924k] to govern nonjudicial foreclosures sales is intended to be
exhaustive’ ” (Debrunner v. Deutsche Bank National Trust Co. (2012) 204 Cal.App.4th
433, 440 (Debrunner)), Commercial Code section 3308’s requirement that the
authenticity of a signature is admitted unless denied in the pleadings is not inconsistent
with nor is it imposing an additional requirement for initiation of a nonjudicial
foreclosure. (See Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th
1149, 1154, fn. 5 [plaintiff’s action to determine whether the owner of a promissory note
authorized its nominee to initiate a foreclosure was inconsistent with the policy of an
efficient and inexpensive remedy of nonjudicial foreclosure].)7 The Nunns did not claim
in their first amended complaint that their signatures on the deed of trust and promissory
note were forged. Their belated attempt to do so in their opposition to summary
judgment fails.
D. Intentional Infliction of Emotional Distress
The trial court ruled that the Nunns could not recover for intentional infliction of
emotional distress because they had not submitted any evidence of harm beyond simply
being distressed. The Nunns contend this was error. They argue that Chase never
intended to approve their loan modification and “strung them along” with an intent to
cause them emotional distress.
We agree with the trial court that the Nunns failed to show a triable issue of
material fact on their emotional distress claims. The elements of a cause of action for
intentional infliction of emotional distress are: “ ‘ “(1) extreme and outrageous conduct
by the defendant with the intention of causing, or reckless disregard of the probability of
causing, emotional distress; (2) the plaintiff’s suffering severe or extreme emotional
distress; and (3) actual and proximate causation of the emotional distress by the
defendant’s outrageous conduct.” ’ ” (Christensen v. Superior Court (1991) 54 Cal.3d
7We note that Commercial Code section 3301 pertaining to the persons entitled to
enforce a note does not govern nonjudicial foreclosures under deeds of trust. (See
Debrunner, supra, 204 Cal.App.4th at pp. 440–441.)
10
868, 903.) The outrageous conduct “ ‘must be so extreme as to exceed all bounds of that
usually tolerated in a civilized community.’ ” (Ibid.)
Here, while we acknowledge that the Nunns experienced several personal tragic
events resulting in emotional distress during the loan modification process, including the
death of their son and the death of Mr. Nunn’s father, their distress was not the result of
any outrageous conduct by respondents. Moreover, emotional distress damages are not
available for economic loss. (See Erlich v. Menezes (1999) 21 Cal.4th 543, 557–558
(Erlich) [emotional distress damages not available in case involving negligent
construction of house where there was no physical injury]; Quinteros v. Aurora Loan
Servs. (E.D.Cal 2010) 740 F.Supp.2d 1163, 1172 [act of foreclosing on home, absent
other circumstances, is not the kind of extreme conduct that supports an intentional
infliction of emotional distress claim].)
Ragland v. U.S. Bank National Assn. (2012) 209 Cal.App.4th 182, upon which the
Nunns rely, is distinguishable. There, the plaintiff alleged that her mortgage broker
forged her signature on her loan documents and when she informed the bank, it urged her
not to make her April payment while it investigated the incident. (Id. at pp. 188–189.) In
reliance on the bank’s statements, she cancelled her scheduled loan payment only to
receive a delinquency notice. (Id. at p. 188.) When she called to inquire about the
delinquency, she was told that the bank could not collect payments from her while the
forgery investigation was ongoing. (Id. at pp. 188–189.) The bank thereafter instituted
foreclosure proceedings and refused to accept her proffered payment. (Id. at p. 189.)
The court of appeal held that bank’s treatment of the plaintiff exceeded all bounds of
decency and reversed summary judgment on the plaintiff’s claim. (Id. at pp. 205, 209.)
Here, the same level of egregiousness is simply not present. Chase allowed the
Nunns to apply repeatedly for loan modification relief; its actions do not even approach
the level of outrageous conduct upon which an emotional distress claim can be
predicated.
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E. Implied Covenant of Good Faith and Fair Dealing
The trial court found there were triable issues of fact as to whether the Nunns
complied with the terms of the TPA and whether the TPA required Chase to offer them a
loan modification. Yet, it granted summary judgment on the breach of implied covenant
of good faith and fair dealing cause of action, finding that the Nunns had failed to show
there was a triable issue of material fact on whether they suffered damages. This was
error.
It is well settled that “ ‘ “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.” ’ [Citations.]” (Rufini v. CitiMortgage, Inc. (2014)
227 Cal.App.4th 299, 308 (Rufini).) The Nunns contend that respondents breached the
implied covenant of good faith and fair dealing by not adhering to the terms of the TPA.
The Nunns claim that Chase should have modified their loan based on their
compliance with the TPA because it was a HAMP modification. HAMP is the Home
Affordable Mortgage Program implemented by the United States Department of the
Treasury. (West, supra, 214 Cal.App.4th at p. 785.) “ ‘The goal of HAMP is to provide
relief to borrowers who have defaulted on their mortgage payments or who are likely to
default by reducing mortgage payments to sustainable levels, without discharging any of
the underlying debt.’ ” (Ibid., quoting Bosque v. Wells Fargo Bank, N.A. (D.Mass. 2011)
762 F.Supp.2d 342, 347.) Under HAMP, a trial plan agreement must be interpreted to
include a provision that the bank will offer the mortgagee a permanent loan modification
if he or she complies with the agreement’s terms. (West, supra, 214 Cal.App.4th at
pp. 797–798.)
Chase maintained that the Nunns had not made the payments as scheduled in the
TPA, while the Nunns urged that Chase intentionally or negligently blocked timely
payment by providing the wrong code or changing the code for wiring funds. The Nunns
timely made the first payment but did not make the second and third payments until the
first week of November 2009.
12
“[C]ompliance with a [Trial Period Plan (TPP)] can give rise to an enforceable
agreement to permanently modify a loan.” (Rufini, supra, 227 Cal.App.4th at p. 307.) In
Rufini, the court held that the plaintiff stated a claim for breach of contract and wrongful
foreclosure when he alleged that the bank did not offer him a permanent loan
modification although he made the three trial payments pursuant to a loan modification
agreement. (Id. at pp. 304–308.) The court held that although the complaint did not
allege that the modification plan was pursuant to a TPP or HAMP modification, the
plaintiff was entitled to leave to amend his complaint to that effect. (Id. at p. 306.) The
court further held that if the plaintiff alleged sufficient facts to show that the bank was
obligated to modify the loan, he could also be granted leave to allege a claim for breach
of the implied covenant of good faith and fair dealing based on the bank’s refusal to
modify. (Id. at p. 308; and see West, supra, 214 Cal.App.4th at pp. 798–799 [borrower
who complied with trial plan agreement stated a cause of action for breach of contract
where she alleged that bank failed to offer a permanent loan modification].)
Here, the evidence before the court included a TPA signed by the Nunns requiring
three payments of $3,767.74 on August 1, September 1, and October 1 of 2009. While
the agreement provided that if payments were made as scheduled, Chase would
reevaluate their application and determine if it could offer the Nunns “a permanent
workout solution to bring your loan current,” the courts have held that under HAMP, if a
borrower has made all required trial payments and complied with the TPP’s other terms,
the lender must offer the borrower a permanent loan modification. (Rufini, supra,
227 Cal.App.4th at p. 306 and cases cited.) Here, the court found that there was a triable
issue of fact as to whether the Nunns complied with the TPA and whether the TPA
required Chase to offer the Nunns a loan modification upon compliance. Under recent
authority, it is at least arguable that a lender must offer a permanent loan modification to
a borrower who complies with a TPA. The trial court therefore erred in granting
13
respondents’ summary judgment on their implied covenant of fair dealing cause of
action. (Ibid.)8
F. The Ben-Zion declaration
The Nunns submitted the declaration of Barry Ben-Zion, a forensic economist, in
support of their opposition to respondents’ motion for summary judgment. Ben-Zion
offered an opinion on an objective definition of an affordable monthly mortgage
payment. Respondents objected to the admission of the declaration on the ground that it
lacked foundation as Ben-Zion relied on Chase’s current website page on “How much
home can I afford?” and offered no evidence that the information on the current website
reflected what existed on the website at the time the Nunns were allegedly promised a
modification. Respondents also objected to the declaration on the ground that it was
irrelevant as Chase never promised the Nunns’ an “affordable modification,” and that its
probative value was outweighed by the risks of undue prejudice and confusion of the
issues. Finally, it objected to the exhibit of Chase’s website attached to the declaration as
inadmissible hearsay. The trial court sustained the objections.
The Nunns assert that the trial court should have admitted the declaration. We
disagree. The Ben-Zion declaration simply related a definition of an affordable monthly
mortgage payment as being based on a debt to income ratio of 36 percent or less. Ben-
Zion offered no opinion on whether the Nunns would have qualified for a loan
modification within those parameters. Nor did the Nunns submit any evidence that they
would have been able to afford a mortgage with a debt to income ratio of 36 percent. The
declaration was thus not relevant to the issue of whether the Nunns qualified for a loan
modification.
8
At oral argument, respondents’ counsel asserted that plaintiffs had not alleged
they applied for a HAMP loan modification and that nothing in the TPA indicated it was
offered as part of a HAMP loan modification. But Chase itself, in its Statement of
Undisputed Material Facts, stated that “Plaintiffs were denied for loan modification under
HAMP and Chase’s internal loan modification programs . . . .” (Italics added.) On the
record as a whole, the trial court correctly found that whether the bank was required to
offer a loan modification if the borrowers complied with the TPA was a question of fact.
14
G. Negligence
The trial court sustained respondents’ demurrer to the Nunns’ causes of action for
negligence and negligent infliction of emotional distress on the ground that the Nunns
failed to allege facts to show that respondents owed them a duty of care. Relying on
Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 898–901, the Nunns
argue that respondents owed them a duty of care in the loan modification process. The
Jolley case involved a construction loan contract in which the court held that the
borrower stated a cause of action for negligence. (Id. at pp. 898, 906.) The court
concluded that the bank owed the plaintiff a duty to review his request for a loan
modification in good faith because there was an ongoing dispute about the bank’s
performance and its disbursement of monies due under the loan contract and the bank’s
representative had made specific representations as to the likelihood of a loan
modification. (Id. at pp. 899–900.) The Jolley court distinguished a residential home
loan where the general rule is a financial institution owes no duty of care to a borrower
when it is a mere lender of money: “We note that we deal with a construction loan, not a
residential home loan where, save for possible loan servicing issues, the relationship ends
when the loan is funded. By contrast, in a construction loan the relationship between
lender and borrower is ongoing, in the sense that the parties are working together over a
period of time, with disbursements made throughout the construction period, depending
upon the state of progress towards completion.” (Id. at p. 901.)
The Jolley case was criticized in Lueras v. BAC Home Loan Servicing, LP (2013)
221 Cal.App.4th 49, 67 “to the extent it suggests a residential lender owes a common law
duty of care to offer, consider, or approve a loan modification.” The Lueras court thus
declined to impose a duty of care in the handling of residential loan modification
negotiations or servicing. (Ibid.) It, however, granted the plaintiffs leave to amend their
complaint to allege a cause of action for negligent misrepresentation, concluding that a
lender does owe a duty to a borrower to not make material misrepresentations about the
status of a loan modification or the status of a foreclosure sale. (Id. at pp. 68–69.)
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More recently, in Alvarez v. BAC Home Loans Servicing, L.P. (2014)
228 Cal.App.4th 941, 944–945, Division Three of this appellate district held that a bank
owes a borrower a duty of care in negotiating or processing an application for a loan
modification. Applying the balancing factors of Biakanja v. Irving (1958) 49 Cal.2d
647, 6509 for determining whether a lender owes a borrower a duty of care, the court
concluded that because the bank had allegedly agreed to consider modification of the
plaintiffs’ loans, the factors weighed in favor of a duty. “The transaction was intended to
affect the plaintiffs and it was entirely foreseeable that failing to timely and carefully
process the loan modification applications could result in significant harm to the
applicants. Plaintiffs allege that the mishandling of their applications ‘caus[ed] them to
lose title to their home, deterrence from seeking other remedies to address their default
and/or unaffordable mortgage payments, damage to their credit, additional income tax
liability, costs and expenses incurred to prevent or fight foreclosure, and other
damages.’ ” (Id. at pp. 948–949.) In considering whether the lender’s conduct was
blameworthy, the court noted that it was highly relevant that the plaintiffs lacked virtually
any bargaining power in the loan modification process. “The borrower’s lack of
bargaining power coupled with conflicts of interest that exist in the modern loan
servicing industry provide a moral imperative that those with the controlling hand be
required to exercise reasonable care in their dealings with borrowers seeking a loan
modification. Moreover, the allegation in the complaint that defendants engaged in ‘dual
tracking,’ which has now been prohibited (see Civ. Code, §§ 2923.6 [lender precluded
from recording notice of default or notice of sale while loan modification application is
pending], 2924.18 [procedures for mortgage servicer to follow upon borrower’s
completion of loan modification application]) increases the blame that may properly be
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These factors are: (1) the extent to which the transaction was intended to affect
the plaintiff; (2) the foreseeability of the harm; (3) the degree of certainty that the
plaintiff was injured; (4) the connection between the injury and the defendant’s conduct;
(5) the moral blame attached to the defendant’s conduct, and (6) the policy of preventing
future harm. (Biakanja, supra, 49 Cal.2d at p. 650.)
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assigned to the conduct alleged in the complaint.” (Id. at pp. 949–950.) The court
concluded that the plaintiffs’ allegations raised an issue as to whether the lender had
breached a duty of care in failing to process the loan modification application in a timely
manner, by losing documents and by engaging in dual tracking. (Id. at p. 951.) The court
therefore held that the plaintiffs had set forth a cause of action for negligence in the
servicing of their loan and reversed. (Id. at pp. 951–952.) We believe the reasoning in
Alvarez is persuasive.
Here, the Nunns have alleged that respondents failed to exercise due care in the
review of their loan modification application and engaged in dual tracking by telling
them to apply for a loan modification and forgo making their payments, causing them to
default on their loan, and using the default to begin foreclosure proceedings. They also
alleged that respondents lost documents, requiring them to resubmit documents over a
period of three years to no avail. These alleged facts are minimally sufficient to support a
claim that respondents owed a duty of care.
In their supplemental brief, respondents contend that the Alvarez analysis does not
apply here because (inter alia) the operative complaint (1) fails to identify any
miscalculation or error made by Chase with respect to any particular loan modification
application; (2) fails to allege that the Nunns would have qualified for a loan modification
but did not receive it; (3) fails to allege they lost title to their home due to any
mishandling of the application by Chase; and (4) fails to allege that the Nunns applied for
a HAMP loan modification (as opposed to some other kind of loan modification) and that
Chase owed the Nunns a duty to exercise reasonable care in processing their application.
Respondents also assert the Nunns were legally ineligible for a HAMP modification due
to the amount of the outstanding loan and therefore cannot allege that anything Chase did
or did not do was the legal cause of their inability to secure a modification. These points
are not relevant to our analysis. The trial court sustained respondents’ demurrer based on
its conclusion a lender owes no duty to a residential borrower. We remand because,
pursuant to Alvarez, that legal premise is no longer sound. Whether the negligence claim
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fails on other grounds and whether the Nunns can proffer amendments to cure any
deficiencies are matters to be decided in the trial court.
H. Negligent Infliction of Emotional Distress
The Nunns alleged that respondents “so negligently and carelessly carried out their
statutory duty to offer [the Nunns] a modification” as to cause them to suffer “mental
pain and severe distress.” The trial court concluded this was not an actionable claim
because respondents did not owe the Nunns any duty of care. We agree the claim is not
actionable, but for a different reason. As we explain, emotional distress damages cannot
be awarded based on a negligence claim resulting only in economic loss.
In Erlich, supra, 21 Cal.4th 543, the defendant, a contractor, built plaintiffs’ home
so poorly that it was described by an expert as containing “major and pervasive” defects,
including inadequate foundation support, constant leakage throughout the house,
disintegrating roof turrets and a deck in danger of “ ‘ “catastrophic collapse.” ’ ” (Id. at
pp. 548–549.) The plaintiffs were awarded damages for emotional distress arising out of
their fear that the home would collapse around them in an earthquake, and resulting from
the shock of learning the extent of the defects, which sent one of the plaintiffs to the
hospital. (Id. at p. 549.) Our high court reversed the award on various grounds, among
them that emotional distress damages are not recoverable where the harm resulting from
the negligence is only economic. “Even assuming [defendant’s] negligence constituted a
sufficient independent duty to the [plaintiffs], such a finding would not entitle them to
emotional distress damages on these facts. ‘The fact that emotional distress damages
may be awarded in some circumstances (see Rest.2d Torts, § 905, pp. 456–457) does not
mean they are available in every case in which there is an independent cause of action
founded upon negligence.’ [Citation.] ‘No California case has allowed recovery for
emotional distress arising solely out of property damage [citation]; moreover, a
preexisting contractual relationship, without more, will not support a recovery for mental
suffering where the defendant’s tortious conduct has resulted only in economic injury to
the plaintiff. (Smith v. Superior Court (1992) 10 Cal.App.4th 1033, 1040, fn. 1; Mercado
v. Leong (1996) 43 Cal.App.4th 317, 324 [emotional distress damages are unlikely when
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the interests affected are merely economic]; Camenisch v. Superior Court (1996)
44 Cal.App.4th 1689, 1691 [emotional distress damages are not recoverable when
attorney malpractice leads only to economic loss].)” (Erlich, supra, 21 Cal.4th at
pp. 554–555.)
The injury to the Nunns for respondents’ alleged failure to use due care in
processing the loan modification was pecuniary—the anticipated loss of their property.
The plaintiffs in Erlich had far greater cause for severe anxiety and fear than the Nunns,
yet even there, the court refused to expand liability for mental distress where the
underlying damages are strictly financial. (Erlich, supra, 21 Cal.4th at pp. 554–555.)
The general rule is that, “unless the defendant has assumed a duty to plaintiff in which
the emotional condition of the plaintiff is an object, recovery is available only if the
emotional distress arises out of the defendant’s breach of some other legal duty and the
emotional distress is proximately caused by [breach of the independent duty]. Even then,
with rare exceptions, a breach of the duty must threaten physical injury, not simply
damage to property or financial interests. [Citations.]” (Potter v. Firestone Tire &
Rubber Co. (1993) 6 Cal.4th 965, 985.)
I. Remaining Causes of Action
The Nunns contend that the trial court erred in granting summary judgment on
their causes of action for promissory estoppel, fraud, negligent misrepresentation,
promissory fraud, suppression, and unfair competition because they did not offer any
proof of damages. On appeal, they argue that because there is a triable issue of fact on
whether they would have qualified for a loan modification, respondents failed to prove
that the Nunns did not suffer damages.
The Nunns, however, aside from their theory, offer no authority or citations to the
record on the existence of triable issues of fact on the causes of action at issue. “When an
appellant fails to raise a point, or asserts it but fails to support it with reasoned argument
and citations to authority, we treat the point as waived.” (Badie v. Bank of America
(1998) 67 Cal.App.4th 779, 784–785.) The Nunns fail to address the specifics of any of
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the remaining causes of action. We therefore treat any issues concerning those claims as
waived.
III. DISPOSITION
The judgment is reversed as to the causes of action for breach of the implied
covenant of good faith and fair dealing and negligence. The matter is remanded to the
trial court for further proceedings consistent with this opinion. The Nunns shall recover
their costs on appeal.
_________________________
Rivera, J.
We concur:
_________________________
Ruvolo, P.J.
_________________________
Reardon, J.
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