Nungaray v. Litton Loan Servicing, LP
200 Cal. App. 4th 1499
Cal. Ct. App.2011Background
- Nungarays defaulted on a deed-of-trust loan secured by their Simi Valley home and sought a HAMP loan workout; they executed a three-page Loan Workout Plan (Plan) in July 2009, which was not executed by Litton or Bank; plan contemplated forbearance of foreclosure during review but not a modification unless conditions were met; they paid four monthly trial payments, with two returned due to missing information; foreclosure sale occurred November 2009 after plan termination; Bank purchased at foreclosure and evicted the Nungarays; they sued Litton and Bank for breach of contract, negligence, and quiet title; trial court granted summary judgment finding no enforceable modification and no violation of the one-form-of-action rule; court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is the Plan an enforceable loan modification contract? | Nungarays argue the Plan created new obligations and led to reliance. | Litton/Bank contend the Plan was not a modification and not enforceable. | No contract; Plan expressly not a modification and conditions unmet. |
| Did Litton and the Bank violate the one-form-of-action rule by keeping the Plan payments as a setoff? | Payments were forbearance under modification efforts and thus a setoff. | Payments were part of a forbearance, not a setoff, and did not foreclose the action; rule not triggered. | Rules not violated; forbearance arrangement did not constitute a setoff. |
Key Cases Cited
- Security Pacific National Bank v. Wozab, 51 Cal.3d 991 (Cal. 1990) (security-first rule; one form of action for debt secured by real property)
- City of Hope National Medical Center v. Genentech, Inc., 43 Cal.4th 375 (Cal. 2008) (contract interpretation is a question of law)
- Sutton v. Warner, 12 Cal.App.4th 415 (Cal.App. 1993) (part performance as an exception to the statute of frauds)
- Lupertino v. Carbahal, 35 Cal.App.3d 742 (Cal.App. 1973) (notice to defaulting trustor required where beneficiary or trustee engages in conduct)
- Mehta v. Wells Fargo Bank, N.A., 737 F.Supp.2d 1185 (S.D. Cal. 2010) (forbearance payments did not trigger one-action or security-first rules)