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Jon Carson et al v. Wells Fargo Bank

December 15, 2011


(Super. Ct. No. PC20090078)

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

Carson v. Wells Fargo Bank



California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Super. Ct. No. PC20090078)

Civil Code section 2923.5*fn1 requires that, before a non-judicial foreclosure for default on a mortgage, a lender must contact the borrower, "assess the borrower's financial situation," and "explore options for the borrower to avoid foreclosure." Plaintiffs Jon Carson and Jennifer Carson, alleging violation of section 2923.5 and other claims, sought injunctive and declaratory relief to prevent foreclosure by defendants.*fn2 In these consolidated appeals from the trial court's order partially denying plaintiffs' request for preliminary injunction and from a judgment of dismissal following demurrer, plaintiffs contend the trial court erred by: (1) requiring them to make cash payments, instead of allowing them to post a bond, to secure a preliminary injunction; (2) allowing defendants to cure a violation of section 2923.5 by republishing the notice of sale; and (3) sustaining defendants' demurrer without leave to amend.

We conclude that plaintiffs received the only potential remedy for a section 2923.5 violation -- postponement of the foreclosure sale while defendants corrected the defect. Plaintiffs do not allege or propose an amendment to allege any viable claim. Therefore, the trial court did not err in sustaining the demurrer without leave to amend and any error in connection with the preliminary injunction was harmless. Accordingly, we affirm the order and judgment.*fn3


Following a ruling on demurrer dismissing a complaint without leave to amend, we assume the truth of all factual allegations properly pleaded in the plaintiffs' operative complaint, as well as matters that may be judicially noticed. (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081; Code Civ. Proc., § 430.30, subd. (a).)

The first amended complaint filed on June 10, 2009*fn4 alleges:

Plaintiffs bought their residence in El Dorado Hills, California, in May 2006, executing a $1,100,000 promissory note in favor of defendants.*fn5

In February 2008, defendants gave "notice of default" (§ 2924c) because of plaintiffs' failure to make their mortgage payments.*fn6

In September 2008, section 2923.5*fn7 became operative. As will be discussed in more detail, the statute imposed new requirements for lenders and new requirements for the contents of the required notice of default and notice of sale in California non-judicial foreclosure proceedings. (Stats. 2008, ch. 69, § 2, eff. July 8, 2008, operative Sept. 6, 2008.)

On December 1, 2008, defendants recorded a notice of sale, setting a sale date of December 31, 2008 (postponed first by defendants and later by order of the court). Plaintiffs allege their copy of the notice of sale did not contain the declaration mandated by section 2923.5, and defendants misrepresented in the recorded copy of the notice of sale that they had complied with section 2923.5.

The complaint alleges defendants failed and refused "adequately" to assess plaintiffs' financial condition "as defendants did not request, nor did defendants review any verbal or written data concerning plaintiffs' financial condition." Plaintiffs also alleged that defendants failed and refused "adequately" to explore options, "to wit: a) Defendants made a verbal agreement with plaintiffs to modify the note, but defendants negligently, intentionally and/or in bad faith, subsequently submitted loan modification documents which materially differed from the terms of the verbal agreement reached by [the parties] all in violation of . . . section 2923.5; and b) Defendants never responded in writing" to a February 2009 letter from plaintiffs' counsel suggesting options to avoid foreclosure.

The pleading also alleges defendants' lending practices and "handling, packaging, processing, closing and foreclosure practices" violated federal laws. With the exception of the Truth in Lending Act (TILA) claim, the complaint does not set forth what specific provisions of the laws had been violated or facts describing the manner in which these laws had been violated.

The pleading sought to stop the foreclosure.

In February 2009, plaintiffs obtained a temporary restraining order and sought a preliminary injunction to enjoin the sale. In his declaration in support of the application for preliminary injunction enjoining foreclosure sale, Mr. Carson stated that plaintiffs' copy of the notice of sale did not include the declaration required by section 2923.5. He also declared, "I am informed and believe that defendant(s) did not assess my financial situation as I was not asked for any financial statements, balance sheets, income statements, profit and loss statements, tax returns or any other documents regarding my financial situation. [¶] . . . Although there were discussions, and what I believed were proposed agreements or agreement(s) regarding forbearance, I am informed and believe that the defendant(s) did not properly or fully explore options for my wife and I to avoid foreclosure of the property including, realistically and reasonably affordable loan modification, short-sale and/or deed in lieu of foreclosure options."

Mr. Carson further declared that he believed he reached a forbearance agreement for a loan modification with defendants' agent, Vondoria Lindsey, in March 2008. Ms. Lindsey said new loan papers would be sent and he would receive them no later than July 2008. Plaintiffs made payments from March through June 2008 pursuant to their understanding of the new agreement. Ms. Lindsey said no further payments would be due until plaintiffs received the loan papers. When Mr. Carson finally received the new loan papers in October 2008, the terms differed from what he thought they were supposed to be. He contacted defendants, who said Ms. Lindsey was not available, there would be no changes, and he would have to sign the papers "or else." Plaintiffs did not sign or return the papers.*fn8

In opposing the preliminary injunction, defendants asserted that they had, in fact, attached the section 2923.5 declaration to the copy of the notice of sale recorded with the county recorder but had not attached it to the copies of the notice of sale mailed to plaintiffs and posted on the property.

After a May 2009 hearing on the preliminary injunction, the trial court issued a written order (dated June 29, 2009) concluding: (1) section 2923.5 does not require lenders to agree to modifications, and any such mandate requiring a lender to modify a duly executed contract would constitute an impairment of contract in violation of the federal Contracts Clause (U.S. Const., art. I, ยง 10, cl. 1); (2) the parties "did in fact have discussions sufficient to satisfy" section 2923.5; and (3) while the court was not requiring a new notice of sale, defendants could easily give a renewed notice of sale with a section 2923.5 declaration attached to each copy, "thereby curing the only remaining technical defect urged by [plaintiffs]." The trial court granted a preliminary injunction, to expire at midnight July 13, 2009, on the condition that plaintiffs pay defendants $33,468.66 by May 22, 2009, and $11,156.22 on June 1 and July 1, 2009. The court order specified that, while the injunction was ...

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