Orcilla v. Big Sur, Inc.
198 Cal. Rptr. 3d 715
Cal. Ct. App.2016Background
- Virgilio and Teodora Orcilla (limited English, low income) obtained a $525,000 loan in 2006; loan secured by a deed of trust naming MERS as beneficiary. Teodora later signed a 2008 loan modification increasing principal and monthly payments.
- ReconTrust recorded notices of default (one rescinded) and conducted a trustee's sale in May 2010; Big Sur purchased the property and obtained possession via unlawful detainer.
- Orcillas submitted a HAMP package in May 2010; they allege Bank of America told their helper the sale would be postponed, but the sale proceeded and the HAMP application was never processed.
- Plaintiffs sued Big Sur, Bank of America, ReconTrust, and MERS asserting 13 causes of action (including equitable cause to set aside sale, statutory notice violations, fraud, breach, promissory estoppel, UCL, quiet title, declaratory relief).
- Trial court sustained demurrers to most causes of action without leave to amend; plaintiffs appealed in propria persona. The Court of Appeal reversed in part and remanded with instructions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether trustee's sale can be set aside because underlying loan and modification were unconscionable (equitable relief) | Orcillas: original loan and 2008 modification were procedurally and substantively unconscionable, rendering instruments unenforceable and sale illegal | Bank: statutory presumption for bona fide purchaser defeats attack on sale; sale complied with foreclosure statutes | Held: Orcillas adequately pleaded unconscionability (low procedural, sufficient substantive). Statutory bona fide purchaser presumption does not bar this equitable claim; demurrer to count 1 should have been overruled. |
| Whether loan modification cured default so notices/sale violated Civ. Code §§ 2924, 2924c | Orcillas: modification letter said it "will bring your loan current" and thus cured default | Bank: letter required performance (payments) by a deadline; Orcillas did not allege they made required payments, so default remained | Held: Orcillas failed to plead cure; claims under §§ 2924 and 2924c insufficient; demurrer sustained to those counts. |
| Whether procedural defects (incorrect sale date, alleged robo-signature) invalidate sale or support fraud/notice claims | Orcillas: Notice of Sale showed wrong date and Second Notice was robo-signed causing prejudice | Bank: no prejudice shown; sale notices otherwise complied; robo-sign allegations lack causal harm | Held: Plaintiffs did not plead actual prejudice or causal link; demurrers to counts alleging these defects were properly sustained. |
| Whether promises to postpone sale created enforceable obligations (breach of oral contract / promissory estoppel / UCL) | Orcillas: Bank agreed to postpone sale when HAMP app submitted; they relied and were harmed; UCL claim for unfair practices tied to enforcement of unconscionable loan | Bank: no bargained-for consideration for oral promise (gratuitous), and plaintiffs fail to allege reasonable reliance or resulting injury for promissory estoppel; UCL causation lacking | Held: Breach of oral contract fails for lack of consideration; promissory estoppel fails for lack of pleaded reliance/causation; UCL claim survives insofar as tied to enforcement of unconscionable agreements — demurrer to UCL (count 12) should have been overruled. |
Key Cases Cited
- Moore v. Regents of Univ. of Cal., 51 Cal.3d 120 (standard of review on demurrer; de novo review)
- Armendariz v. Foundation Health Psychcare Servs., Inc., 24 Cal.4th 83 (unconscionability: procedural/substantive analysis; sliding scale)
- Sonic-Calabasas A, Inc. v. Moreno, 57 Cal.4th 1109 (substantive unconscionability standards)
- Lona v. Citibank, N.A., 202 Cal.App.4th 89 (unconscionability in mortgage/loan context; tender exceptions)
- Debrunner v. Deutsche Bank Nat'l Trust Co., 204 Cal.App.4th 433 (separation of note and deed of trust does not bar nonjudicial foreclosure)
- Jenkins v. JPMorgan Chase Bank, N.A., 216 Cal.App.4th 497 (section 2932.5 inapplicable to deeds of trust; foreclosure procedures)
- Melendrez v. D & I Investment, Inc., 127 Cal.App.4th 1238 (bona fide purchaser presumption limited to statutory notice compliance)
- West v. JPMorgan Chase Bank, N.A., 214 Cal.App.4th 780 (fraud pleading specificity requirements for representations by corporate agents)
- Rossberg v. Bank of America, N.A., 219 Cal.App.4th 1481 (fraud requires causal link between misrepresentation and damages)
- Vella v. Hudgins, 20 Cal.3d 251 (prior unlawful detainer under Code Civ. Proc. §1161a can bar later quiet title claims founded on trustee sale irregularities)