18 Cal. App. 5th 628
Cal. Ct. App. 5th2017Background
- Rossetta defaulted on a 2005 mortgage after job loss and health issues and sought loan modifications from CitiMortgage between 2010–2012. She used a power of attorney for communications through her fiancé.
- CitiMortgage allegedly required borrowers to be three months delinquent before considering HAMP modifications, made repeated requests for the same documents, lost or mishandled her application materials, misstated application status, and denied applications for dubious reasons.
- Rossetta made payments under a repayment plan and several forbearance agreements, never received a permanent HAMP modification or a HAMP trial period plan (TPP) promised in oral representations, and later filed bankruptcy.
- MERS recorded an assignment of the deed of trust to CitiMortgage in October 2012; Rossetta later obtained a forensic audit claiming a purported earlier securitization (2006-1 Trust) made that assignment void, but the pleadings did not allege CitiMortgage ever assigned the loan into that trust.
- Rossetta sued for multiple causes of action (including negligence, intentional/negligent misrepresentation, promissory estoppel, breach of contract, intentional infliction of emotional distress, conversion, and UCL violations). The trial court sustained demurrers and dismissed the second amended complaint; Rossetta appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether lender owed a tort duty of care in handling loan-modification applications (negligence) | Rossetta: CitiMortgage negligently mishandled applications, induced default, lost documents, and misled her, causing foreseeable harm | CitiMortgage: No common-law duty to offer/approve or carefully process modifications; Lueras line bars duty | Court: Reversed dismissal — duty may arise in these circumstances; Biakanja factors weighed for duty here (allege sufficient facts) |
| Whether plaintiff stated fraud/intentional misrepresentation and promissory estoppel claims based on alleged promises of a HAMP TPP/permanent modification | Rossetta: Oral and written communications promised trial and permanent modification; she relied and suffered damages | CitiMortgage: Alleged statements are non-actionable puffery or inconsistent; statute/defenses bar relief | Court: Demurrer properly sustained to intentional misrepresentation and promissory estoppel but plaintiff should be given leave to amend re: alleged April 2012 oral promise of a HAMP TPP |
| Whether plaintiff may plead conversion based on allegation that assignment to CitiMortgage was void due to prior securitization timing | Rossetta: Assignment to CitiMortgage was invalid (purported 2006-1 Trust issues), so defendants converted loan rights | CitiMortgage: No assignment to the 2006-1 Trust was alleged; assignments on record were to CitiMortgage then to a different trust later | Court: Demurrer sustained without leave — complaint did not allege facts showing an invalid assignment to the 2006-1 Trust |
| Whether UCL and other claims survive demurrer | Rossetta: Unlawful, unfair, deceptive practices in modification process | CitiMortgage: Statutory/contractual defenses and general no-duty principles defeat claims | Court: Reversed dismissal as to UCL claim — pleadings sufficiently state UCL violation to survive demurrer in part |
Key Cases Cited
- Biakanja v. Irving, 49 Cal.2d 647 (recognition of factors for imposing tort duties in special relationships)
- Nymark v. Heart Fed. Sav. & Loan Assn., 231 Cal.App.3d 1089 (general rule that lenders owe no duty beyond conventional lending role)
- Lueras v. BAC Home Loans Servicing, LP, 221 Cal.App.4th 49 (holding lenders do not owe a common-law duty to offer/approve modifications)
- Alvarez v. BAC Home Loans Servicing, L.P., 228 Cal.App.4th 941 (holding duty may arise when servicer agrees to consider modification; applying Biakanja factors)
- Yvanova v. New Century Mortgage Co., 62 Cal.4th 919 (borrower's standing to challenge assignments in foreclosure context)