APPEAL from the Superior Court of San Bernardino County. Christopher J. Warner, Judge. Affirmed in part, reversed in part with directions. (Super.Ct.No. CIVSS811443).
The opinion of the court was delivered by: McKinster J.
Filed 05/21/2010; pub. order 6/18/10 (see end of opn.)
Plaintiffs Stephen and Ozelia Harris appeal a judgment entered after the trial court sustained without leave to amend a demurrer to their first amended complaint for breach of contract, breach of the implied covenant of good faith and fair dealing, and unfair business practices. The trial court held that all three causes of action are preempted by the federal Home Owners' Loan Act, or HOLA. (12 U.S.C. § 1461 et seq.) The court also held that the third cause of action, for unfair business practices, was impermissibly added to the first amended complaint without leave of court.
We conclude that the demurrer was properly sustained as to the claims for breach of the covenant of good faith and fair dealing and unfair business practices. However, plaintiffs' claim for breach of contract is not preempted by HOLA, and the judgment must be reversed as to that cause of action.
"Because this case comes to us on a demurrer for failure to state a cause of action, we accept as true the well-pleaded [factual] allegations in plaintiffs' first amended complaint." (Evans v. City of Berkeley (2006) 38 Cal.4th 1, 6.)
In their first amended complaint, plaintiffs alleged that they entered into an agreement for home loan services with World Savings, Inc. Wachovia Mortgage, FSB (Wachovia) is the successor in interest to World Savings, Inc. Plaintiffs had two home loans through Wachovia, secured by a first and second deed of trust on their property in Fontana. During the pendency of the loans, Wachovia failed to apply payments made by plaintiffs to plaintiffs' accounts, causing plaintiffs' accounts to go into default. Wachovia falsely claimed that it did not receive plaintiffs' payments and concealed the fact that it had received the payments and had credited them to its own account rather than to plaintiffs' accounts.
On June 15, 2007, plaintiffs filed a complaint in the Superior Court of San Bernardino County for conversion and other causes of action. On February 26, 2008, plaintiffs and Wachovia entered into a written settlement agreement. In that agreement, Wachovia agreed to credit plaintiffs' first loan account with the disputed amount and to modify the loan agreement from an adjustable interest rate to a fixed interest rate.*fn1
Plaintiffs agreed to dismiss their complaint upon execution of the settlement agreement and did so. However, Wachovia failed to bring plaintiffs' loan account current and failed to modify the loan as agreed. Plaintiffs further alleged that Wachovia acted in bad faith in failing to comply with the terms of the settlement agreement and falsely represented that it would do so, with the intent to deceive plaintiffs and induce them to dismiss their prior action.
In an appeal from a judgment based on an order sustaining a demurrer for failure to state a cause of action, the reviewing court treats the demurrer as admitting all material facts properly pleaded and, giving the complaint a reasonable interpretation, independently determines whether the complaint states a cause of action under any legal theory. (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 38.) Because a demurrer raises only questions of law, "'an appellant challenging the sustaining of a general demurrer may change his or her theory on appeal [citation], and an appellate court can affirm or reverse the ruling on new grounds. [Citations.] After all, we review the validity of the ruling and not the reasons given. [Citation.]'" (Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1396-1397.)
THE DEMURRER WAS PROPERLY SUSTAINED WITHOUT LEAVE TO AMEND AS TO THE SECOND AND THIRD CAUSES OF ACTION ...