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Holbert v. Fremont Investment & Loan

November 30, 2009


APPEAL from a judgment of the Superior Court of Sacramento County, Shelleyanne W.L. Chang, Judge. Affirmed. (Super. Ct. No. 06AS01940).

The opinion of the court was delivered by: Hull, J.


Plaintiff Carolyn Holbert appeals from a judgment of dismissal entered after the trial court granted the motion for summary judgment of defendant Fremont Reorganization Corporation, formerly known as Fremont Investment & Loan (Fremont). Plaintiff contends issues of fact remain on her claims for violation of the federal Truth in Lending Act (15 U.S.C. § 1601 et seq.) (TILA), as amended by the Home Ownership and Equity Protection Act of 1994 (15 U.S.C. §§ 1602(aa) & 1639) (HOEPA), unfair business practices and financial elder abuse stemming from a home loan issued to plaintiff by Fremont.

We conclude Fremont was not required to comply with HOEPA, which applies when the finance charges imposed on a loan exceed a certain threshold. We conclude two charges imposed on plaintiff, one to pay off a pre-existing debt to another lender and another to satisfy a prepayment penalty on a prior home loan, were not finance charges within the meaning of HOEPA.

We further conclude plaintiff has not established a claim against Fremont for unfair business practices. While unfair business practices may include both unlawful and unfair acts, the complaint in this matter alleges only unlawful acts. Furthermore, the alleged unlawful act is a violation of HOEPA, which we conclude did not occur here.

Finally, while plaintiff may have a viable claim against her loan broker for financial elder abuse based on various misrepresentations made during the loan process, she failed to link that claim to Fremont, who is as much a victim of the broker's misrepresentations as plaintiff.

We therefore affirm the judgment of dismissal.

Facts and Proceedings

On review of a judgment based on an order granting summary judgment, we construe the evidence and reasonable inferences therefrom in the light most favorable to the opposing party. (Molko v. Holy Spirit Assn. (1988) 46 Cal.3d 1092, 1107; Sellery v. Cressey (1996) 48 Cal.App.4th 538, 541, fn. 1.)

At the time of the Fremont loan, plaintiff was more than 65 years old and lived in a home in Citrus Heights, California that she and her husband had purchased in 1999. Although plaintiff is certified as a notary, she was not employed as such and subsisted on social security benefits of $1,137 per month.

In 2003, plaintiff's husband died from a lengthy illness that "severely strained [plaintiff's] financial situation." That year, plaintiff obtained a loan from Ameriquest in the amount of $144,500 secured by a deed of trust on her home in order to pay off various debts. After paying off the prior mortgage and about $5,000 in loan fees, plaintiff received approximately $18,000 in cash out of the Ameriquest loan.

In June 2004, plaintiff again refinanced her home mortgage, this time with a loan from World Savings in the amount of $153,750. After paying off the Ameriquest loan and loan fees of over $3,500, plaintiff received approximately $5,000 in cash.

In February 2005, plaintiff obtained a loan from New Century Mortgage in the amount of $204,000, secured by a deed of trust on her home. After paying off the World Savings loan and other debts and fees of over $9,000, plaintiff received $5,574 in cash out of the loan proceeds. At the time of this loan, plaintiff's home was appraised at $240,000. Plaintiff's initial payments on this new loan were $943.50.

In June 2005, after determining the payments on the New Century loan were more than she could afford, plaintiff entered into a listing agreement for the sale of her home.

On June 7, plaintiff received a call from an employee of California Real Estate Investments & Loans, Inc. (CREIL) about refinancing her home loan. At the time, plaintiff told the caller she was on a fixed income of $1,137 per month and said she was only interested in refinancing if she could reduce her payments while trying to sell the home. The caller said this could be done and CREIL would help plaintiff sell her home.

On July 1, 2005, plaintiff met with Samantha Pham, who informed plaintiff she was the owner of CREIL. Plaintiff told Pham she was living on a fixed income, could not afford her current payments, and needed a single payment that included an impound account for taxes and insurance. Pham directed plaintiff to sign some papers to begin the refinancing process and assured plaintiff she could obtain a loan that would reduce plaintiff's financial obligations. Pham also represented to plaintiff that the information in the loan documents was consistent with what plaintiff had earlier told CREIL. Plaintiff signed the loan application based on these assurances.

The loan application materials listed the value of plaintiff's property at $265,000. They also represented plaintiff's income as including $4,800 per month as a self-employed notary.

Pham submitted the loan application to Fremont. On July 20, Fremont sent plaintiff documentation listing estimated fees and costs associated with the new loan. This documentation listed total costs and fees of $17,969.32, which included $15,022.50 in broker fees to CREIL.

On July 25, plaintiff again met with Pham, who presented her with a "stack" of loan documents for a loan from Fremont in the amount of $265,000. These documents included revised estimates of fees and costs. Also included with the loan documents was a list of debts to be paid off from the loan proceeds, including a loan from Wells Fargo Bank in the amount of $4,299. The documentation further disclosed a payment of $4,528.80 as a penalty for prepayment of the New Century loan. Pham notarized plaintiff's signature on these documents, for which Pham was paid $300 out of the loan proceeds.

The initial monthly payment on the Fremont loan was $1,916.84, which did not include taxes and insurance. The Fremont loan included a prepayment penalty clause that applied during the first two years of the loan. After payoff of the New Century loan and the costs and fees of the Fremont loan, plaintiff received $31,361.73 in cash out of the loan proceeds.

On the day plaintiff signed the loan documents, Pham deposited $4,500 in plaintiff's bank account and later asked plaintiff for a bank receipt showing the balance in her account. Plaintiff provided the receipt on July 28. On August 2, Pham transferred the $4,500 back out of plaintiff's account.

Pham assured plaintiff she need not worry about the large loan payments, which were well beyond plaintiff's monthly income. Pham told plaintiff she could use the cash she received from the loan proceeds to make the loan payments while Pham helped plaintiff sell her home. However, Pham never assisted plaintiff in selling her home, and plaintiff used up most of the loan proceeds in making the loan payments to Fremont.

During 2006, plaintiff's attempts to sell her home were unavailing, because Fremont refused to consider doing a "short sale" and refused to waive the prepayment penalty on its loan.

On May 9, 2006, plaintiff filed this action against defendant, Pham and CREIL, alleging the Fremont loan is a "high fee" loan subject to HOEPA, thereby triggering special disclosure requirements with which the defendants did not comply. The first two causes of action of the complaint allege fraud and breach of fiduciary duty by Pham and CREIL. The third cause of action alleges a violation of TILA by Fremont. In particular, plaintiff alleges (1) Fremont failed to disclose all costs and fees associated with the loan, (2) the loan charged excessive interest, and (3) the loan included an unlawful prepayment penalty clause. The fourth cause of action alleges predatory lending by all defendants. In particular, plaintiff alleges the defendants violated Financial Code section 4973 by failing to provide necessary consumer cautions regarding the loan. The fifth and sixth causes of action allege unfair business practices and financial elder abuse by all defendants. Finally, the seventh cause of action seeks injunctive and declaratory relief.

On August 28, 2006, the trial court sustained Fremont's demurrer to the fourth cause of action.

On June 15, 2007, Fremont moved for summary judgment or summary adjudication of the third, fifth, sixth, and seventh causes of action. The trial court thereafter issued a tentative ruling granting Fremont's motion. On the third cause of action, the court concluded the payoff of the Wells Fargo loan in the amount of $4,299 was not a "finance charge" associated with the Fremont loan and therefore did not count toward the total costs and fees of the loan. And because the other costs and fees of the loan did not exceed the 8 percent threshold of HOEPA, that act did not apply. Thus, Fremont was not required to make enhanced disclosures and was not prohibited from including a prepayment penalty in the loan.

On the fifth cause of action, the court concluded plaintiff's claim is that Fremont engaged in unfair business practices by virtue of issuing a loan that violated HOEPA. However, because the court concluded there was no HOEPA violation, the fifth cause of action likewise fails.

On the sixth cause of action for elder abuse, the court concluded the evidence is undisputed plaintiff received value for the Fremont loan and signed the loan documents voluntarily. To the extent plaintiff relied on misrepresentations to sign the loan documents, those misrepresentations were made by Pham and CREIL, not Fremont.

Finally, on the seventh cause of action, the court concluded that because of its ruling on the other claims, there is no basis for injunctive or declaratory relief.

Following oral argument, the court took the matter under submission and affirmed the tentative ruling with one addition. At oral argument, plaintiff requested leave to amend her unfair business practices claim. The court denied this request as untimely. The court further indicated it was not convinced the acts of which plaintiff complained amounted to unfair business practices.

Thereafter, according to plaintiff, "after receiving terminating sanctions against Pham and CREIL and having their default entered, [plaintiff] obtained a judgment against Ms. Pham and CREIL."

On December 7, 2007, the trial court entered judgment of dismissal in favor of Fremont.


I. Introduction

A motion for summary judgment will be granted if the moving papers establish there is no triable issue of material fact and the moving party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c).) A moving defendant has met this burden by establishing that one or more elements of each cause of action of the complaint cannot be established or that there is a complete defense to each cause of action. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 849-850.)

"A party may move for summary adjudication as to one or more causes of action within an action, one or more affirmative defenses, one or more claims for damages, or one or more issues of duty . . . ." (Code Civ. Proc., ยง 437c, subd. (f)(1).) A motion for summary adjudication works the same as a motion for summary judgment, except it applies to a single cause of action, affirmative defense, claim ...

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