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Filed 5/31/16 Walker v. PennyMac Loan Services CA1/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

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 This opinion has not been certified for publication or or dered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION THREE

ART WALKER, Plaintiff and Appellant,

v. PENNYMAC LOAN SERVICES, LLC, Defendant and Respondent. A142849
(City & County of San Francisco Super. Ct. No. CGC13532110)

Art Walker appeals after the court sustained demurrers to his complaint for damages arising from a non

- judicial foreclosure sale of his ho m e. The nub of his allegations is that th e bank foreclosed even though he made all of his loan payments on
time and prevented him from reinstating the loan before the sale by refusing to provide
him an accurate reinstatement figure. The complaint sufficiently alleges causes of action
for breach of contract and wrongful foreclosure, so we reverse as to those causes of
action

. Other issues that were not addressed in W alker’s opening appellate brief concerning Civil Code section 2924 , subdivision (a)(1)(C), 1 false light
, and unfair business practices
, are abandoned.
BACKGROUND Because this appeal challenges an order sustaining a demurrer, we draw the
relevant facts from the complaint and documents subject to judicial notice. ( Adams v.
Paul (1995) 11 Cal.4th 583, 586 ; Ham ilton v. Greenwich Investors XXVI, LLC (2 011) 195 Cal.App.4th 1602, 1608

– 1609 ( Hamilton ) .)

1 Further statutory citations are to the Civil Code.2 I. The Complaint
Walker refinanced his home in November 2006. Defendant PennyM ac Loan Services, LLC (PennyMac) 2 subsequently became the beneficiary of the loan
, assumed servicing the loan and the rights and obligations under the promissory note and deed of

trust

. As alleged in the operative second amended complaint, PennyMac “recorded a
Notice of Default when Plaintiff was not late on his payments.” (Italics i n original)
Walker alleged he made monthly mortgage payments of $3,751.56 every month between
November 2006 and December 2011. He received notices that t h e amount of his monthly payments was lowered in January 2012 $2,526.56 and again in July 2012 to $1

. 914.06.
Walker made those payments through July 2012. In June 2012, PennyMac notified Walker that his loan was in default “for his February 2012 payment, as well as every payment since June 2012.” Walker checked his
statement and saw that since Februa ry 2012 none of his payments had been applied to his

account. When he called PennyMac, he was told his payments were not being applied to his account beca use they were instead first applied to late charges PennyMac said he had
incurred. Walker unsuccessf ully told PennyMac this was incorrect and that his payments should be applied to his account

. Walker did not receive his usual monthly mortgage statement in August, so he called PennyMac and attempted to make a payment. PennyMac said his loan was in default, so they would no longer accept his payments. In September PennyM ac recorded
a notice of defa ult that sai d Walker had failed to make monthly payment s since March and was in default for $16,139.34. Walker again contacted PennyMac t o try to resolve
the dispute, but “after many phone calls througho u t September 2012 through February 2013, he was unable to speak with anyone at PennyMac to determine the [amount]

2 The complaint names Pnmac Mortage Opportunity Fund Investors, LLC as an additional defendant and alleges it assumed the ownership of his loan. Because any differences between the two entities are not relevant to the issues raised on appeal, for simplicit y’s sake we will refer to both entities as PennyMac.3

actually due on his mortgage.” He finally received a reinstatement quote f rom PennyMac in February, but the quote was inaccurate “ in that it demand ed payment for the months of March 2012 through July 2012, months in which [Walker] had made his mortgage
payment. ” (Italics added.) Walker tried to contact PennyMac to determine th e correct reinstatement figure and advise PennyMac that he had already made his payments for March through July, but PennyMac refused to discuss it with him and continued to demand payment

. In April 2013 PennyMac recorded a notice of trustee’s sale . Walker continued trying to obtain an accurate reinstatement quote throughout that month, but PennyMac
refused t o comply. A friend of his attended the May 6, 2013 Trustee’s sale “with enough cash to either reinstate the loan or purchase the pro p erty for the loan amount,” but PennyMac refused to accept the offer and sold the property to third parties. The cause of action for breach of contract alleged PennyMac breached the terms of the note by misapplying Walker’s February through July 2012 mortgage pay ments to late charges before interest and principle. A cause of action for wrongful foreclosure alleged the notice of default incorrectly stated Walker was in default as of March 1, 2012, although he had made his payments for March through July; that Penn yMac’s arrearage figure “was an inaccurate amount, inflated with late fees and attorneys’ fees, for months in which Plaintiff was not late; ” and that “from September 2012 through May 2013, Defendants continued to provide Plaintiff with an inaccurate re in st atement quote, which demanded that Plaintiff tender monies for months in which Plaintiff was not in default,” thereby interfering with his statutory right to reinstate his loan prior to the sale

. Walker

was, “ at all times, ready, willing and able to reins tate the loan” but PennyMac “refused Plaintiff’s attempts and continued to demand an inaccurate reinstatement amount.”
II. The Demurrers
Walker filed the initial complaint in June 2013 and a first amended complaint in November 2013. The amended pleading alleged causes of action for breach of contract, wrongful foreclosure, false light and unfair competition but omitted a cause of action for quiet title that appeared in the original pleading. PennyMac filed a demurre r, which was4

sustained as to the causes of action for breach of contract, wrongful foreclosure and false light

. When Walker filed a second amended complaint (the complaint)
, PennyMac
demurred again . This time the court sustained the demurrer without leave to amend and
dismissed the act ion with prejudice. Its written order stated: “Plaintiff fails to allege an actionable breach of contract; facts asserted in the complaint do not support [the] allegation of breach of paragraph 2 of the Deed of Trust. Cause of action for false light is
b arred by the statute of limitations. . . . Plaintiff fails to allege tender. Plaintiff did [not] provide any facts that may be alleged to amend the complaint.” Walker appealed from the order on August 14, 2014. Although the record does
not include a judgment of dismissal, in the interest of expediency we will construe the appeal as from a final judgment. (See McAllister v. County of Monterey (2007 ) 147 Cal.App.4th 253, 278.)
DISCUSSION
I. Standards of Review
W e review an order sustaining a demurrer de novo to determine whether the complaint states facts sufficient to constitute a cause of action. ( Bower v. AT&T Mobility, LLC (2011) 196 Cal.App.4 th 1545, 1552; Stanton Road Associates v. Pacific Employers Ins. Co. (1995) 36 Cal.App.4 th 333, 340 ( Stan ton Road ) .) We construe the complaint liberally, treating it “ ‘ “ as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed.” [C itation.] Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context.

. . . ’ ” ( Stanton Road

, supra, 36 Cal.App.4 th at pp. 340

– 341 ; Jager v. County of Alameda (1992) 8 Cal.App.4 th 294, 296

– 297 .) When a demurrer is sustained without leave to amend, “ we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not,
there has been no abuse of dis cretion and we affirm. [Citations.] The burden of proving5

such reasonable possibility is squarely on the plaintiff.’ [Citations.]” ( Stanton Road
, supra , at p. 341.) II. Analysis A. Breach of Contract According to the complaint, PennyMac misapplied Walker’s February through July 2012 mortgage payments to late charges instead of interest and principle. Walker alleged this was a breach of s ection 2 of the deed of trust (appended to the complaint)
which in part stat ed that “ ‘ all payments a ccepted and applied by Lender shall be applied in the following order of priority: (a) interest due under the Note; ( b) principal due under the Note. . . . Such payments shall be applied to each Periodic Payment in the order in which it became due. Any r emaining amounts shall be applied first to late charges, second to any other amounts due under this Security Instrument, and then to reduce the principal balance of the Note.’ ” But, a s PennyMac observes, the complaint omitted material language from section
2

. Specifically, the passage quoted by W alker is qualified by the immediately preceding phrase, “ Except as otherwise described in this Section 2

. . . . ” (Italics added.) Then, directly following the quoted language , s ection 2 goes on to pr ovide : “if Lender receives a payment from Borrower for a delinquent Periodic Payment which includes a sufficient amount to pay any late charge due, the payment may be applied to the delinquent payment and the late charge. If more than one Periodic Payment is outstanding, Lender may apply any payment received from Borrower to the repayment of the periodic Payments if, and to the extent that, each payment can be paid in full. To the extent that any excess exists after the payment is applied to the full paym ent of one or more Periodic Payments, such excess may be applied to any late charges due.” PennyMac argues that, taking s ection 2 as a whole, Walker failed to allege a breach of contract because his payments “very well may have been applied to outstanding payments and corresponding late charges” as authorized by the language omitted from the complaint

. As a factual matter, that might be the case. Or, it might not. The difficulty with PennyMac’s argument is that th is is a demurrer, and PennyMac’s argument turns on a6

question of fact. T he question is not whether Walke r can prove a breach of contract
, but whether his allegations, liberally construed, are sufficient to constitute the cause of
action. We think his allegations get over that hurdle

. T he complaint , read as a whole and liberally construed, alleges that Walker was not late on his p ayments; that he made them every month in an amount instructed by PennyMac ; that the loan was current as of December 2011; and that he thereafter continued to m ake his payments in the correct

amounts until PennyMac told him in July 2012 that it would no longer accept them. For purposes of a demurrer, t hese allegations support a reasonable inference that PennyMac applied Walker’s payments to purported late charges that he had not incurred
, rather than to interest and principal
, in breach of the deed of trust. “ ‘ Ordinarily, a general demurrer should not be sustained unless the complaint liberally constru ed fails to state a cause of action on any theory. [Citations.] Material facts alleged in the complaint are treated as true for the purpose of ruling on the demurrer. [Citation.] Also taken as true are facts that may be implied or inferred from those e xpressly alleged.

. . . In short, the ruling on a demurrer determines a legal issue on the basis of assumed facts, i.e., all those material, issuable facts properly pleaded in the complaint, regardless of whether they ultimately prove to be true. The com plaint will ordinarily be upheld even though the facts are not clearly stated, or are intermingled with a statement of irrelevant facts. ’ ” ( State of California ex rel. Bowen v. Bank of America Corp

. (2005) 126 Cal.App.4th 225,
239

– 2 40 .) The complaint co uld certainly have been clearer, but it is sufficient to state a cause of action for b reach of contract

. B

. Wrongful Foreclosure
The cause of action for wrongful foreclosure rests on closely related factual
assertions. As noted, the complaint allege s that from the initial notice of default through May 2013, PennyMac persisted in giving Walker an inaccurate quote for the amount necessary to cure his purported default. Walker alleged he made numerous attempts to obtain an accurate reinstatement figure and was at all times r eady , willing and able to reinstate his loan, but PennyMac’s refusal to comply prevented him from doing so.7

Mortgage lenders have a statutory duty to provide accurate information to a defaulting borrower who requests information co ncerning the amount necessary to exercise its right to cure the default and reinstate the loan by paying the amount owed. 3 ( § 2924c subds. (a)(1) , (e) ; Anderson v. Heart Federal Savings (1989) 208 Cal.App.3d 202, 215

– 217 (

Anderson ) ; Susilo v. Wells Fargo Bank, N.A. (C .D. Cal . 2011) 796 F.Supp.2d 1177, 1187

– 1188 ; In re Tome (Bankr. C.D. Cal. 1990) 113 B.R. 626, 636.)

. “The obligation of the [lender] to provide the [borrower] with an accurate accounting of the amounts due to cure a default is governed by statute. Secti o n 2924 specifies that a copy of the notice of default must be sent to the [borrower] together with ‘the statement specified in paragraph (1) of subdivisi o n (b) of Section 2 9 24c’ that the [borrower] may have the ‘legal right to bring you r account in good standing by paying all of your past due payments plus permitted costs and expenses within the time permitted by law’ and informs him that: ‘This amount is __________ as of ( date ). . . .’ ” ( Anderson , supra, 208 Cal.App.3d at p. 215.) T h e notice of default must include the name, mailing address and telephone number the borrower can use to find out “ the amount you must pay , or to arrange for payment to stop the foreclosure. . . .” ( § 2924c, subd.(b)(1) , italics added .) “Compliance with this provision necessarily requires that the beneficiary provide
accurate information in response to an inquiry by the trustor.” ( Anderson , supra , at p. 216.) PennyMac does not directly address Walker’s claim that he could and would have
reinstated the loan pursuant to section 2924c but for PennyMac’s refusal to tel l him the amount actually owed. Instead
, PennyMac alludes to Walker’s allegation that his friend unsuccessfully attempted to reinstate the loan or purchase the property at the trustee’s
sale

. T rue, the right to reinstate lapsed five days before the sale ( § 2924c, subd. (e)), so
his friend’ s alleged offer was of no effect. But that ineffective offer has no bearing on Walker’s distinct allegation that PennyMac prevented him from reinstating his loan

3 To be clear, the statutory reinstatement amount does not include “the portion of principal as would not then be due had no default occurred.” (§ 2924c, subd. (a)(1)(C); see Miller & Starr, Californi a Real Estate (4th ed. 2015) § 13:230, pp. 13

- 18

– 13

- 20.)8

during the statutory reinstatement period by refusing to provide him an accurate reinstatement figure

. PennyMac argues , in essence, that its compliance with section 2924c was good enough, even if it quoted the wrong reinstatement amount, because Walker was on notice of the default and “does not allege he suffered prejudice as a result of the purportedly
deficient notice.” Not so. T he c omplaint plainly alleges that Walker was ready, able and willing to reinstate , and that he would have done so h ad PennyMac given him an accurate figure

. Assuming the truth of those allegations, p rejudice is obvious

. PennyMac also suggests it was Walker ’s obligation to dispute the allegedly inaccurate reinstatement figure by “us[ing] the legal process to attempt to halt the foreclosure sale or pay the reinstatement and work with or sue PennyMac to recover the overpayment.” Not so.
Section 2924c places the burden on the lender to notify the borrower of the amount require d for reinstatement . ( § 2924c, subd. (b)(1); Anderson , supra, 208 Cal.App.3d at p. 216.) “Because nonjudicial foreclosure is a ‘drastic sanction’ and a ‘draconian remedy’ [citation], ‘ “[t]he statutory requirements must be strictly complied with.” ( Ung v

. Koehler (2005) 135 Cal.App.4th 186, 202

– 203.) By no measure is sending out an incorrect dollar figure and leaving it to the borrower to pay an in cor r ect amount and fight
it out in court adequate compliance with the statute

. C

. Tender PennyMac contends the trial court properly sustained the demurrer as to all causes of action because the complaint fails to allege that Walker tendered the amount of the
secured indebtedness. Here too, we disagree.

“ A power of sale in a deed of trust is a creature of con tract, arising from the parties’ agreement.

. . . As is typical, the deed of trust . . . allows the beneficiary to exercise its power of sale only if an ‘event of default’ occurs.” ( Bank of America., N.A. v. La Jolla Group II (2005) 129 Cal.App. 4th 706, 712.) Here, the breach of contract claim alleged, in effect, that there was no default triggering PennyMac ’s right to foreclose
under the deed of tru st. If there was no default, PennyMac had no right to foreclose on Walker’s property , th e trustee’s sale was void , and
, under settled law, no tender was9

required

. ( Barroso v. Ocwen Loan Servicing, LLC (2 012) 208 Cal.App.4th 1001, 1016

– 1017; see also Alvarez v. BAC Home Loans Servicing, L.P. (2014) 228 Cal. App.4th 941,
951

– 952 (

Alvarez ) [tender not required where borrowers alleged lenders negligently failed to process applications for loan modification]; Menan v. U.S. Bank Nat. Ass’ n (E.D. Cal

. 2013) 924 F.Supp.2d 1151, 1160 [“The law does n o t require plaintiff to ten der the purchase pric e to a trustee who has no right to sell the property at all”].)
We are also unpersuaded that the tender requirement applies to Walker’s claim
that PennyMac interfered with his right of reinstatement under section 2924c

. Mabry v. Superior Court (2010) 185 Cal.App.4th 208 ( Mabry ) is instructive. The borrower there alleged that its lender bre ached its duty under section 29 23.5 to contact t he borrower to explore options for preventing foreclosure before filing notice of default. The court held
th e borrower was not required to tender the full amount of indebtedness before challenging the foreclosure on that ground. It explained: “ Case law requiring payment or tender of the full amount of payment before any foreclosure sale can be postponed (e.g.,
Arnolds Management Corp. v. Eischen (1984) 158 Cal.App.3d 575 , 578

. . . [‘It is settled that an action to set aside a trustee’s sale for irregularities in sale notice or procedure should be accompanied by an offer to pay the full amount of the debt for wh ich the property was security.’]) arises out of a paradigm where by definition , there is no way that a foreclosure sale can be avoided absent payment of all the indebtedness. Any irregularities in the sale would necessarily be harmless to the borrower if there was no full tender. [Citation.] By contrast, the w h ole point of section 2923.5 is to create a new, even if limited, right to be contacted about the possibility of alternatives to full payment of arrearages. It would b e contradictory to thwart the very operation of the statute if enforcement were predi c ated on full tender.” ( Mabry, supra , 185 Cal.App.4th at p. 225. ) Here, i t would be equally nonsensical to require a borrower who alleges the lender illegally interfered with his statutory right to reinstate his loan by paying the amounts then in default to tender the full amount of his indebtedness

. By parity of reasoning, w e likewise decline to undermine the right protected in section 2924c, by contorting the tender rule, generally applied in actions to set aside a trustee’s sale for irregularities in10

sale notice or procedure ( Alvarez v. BAC Home Loans Servicing, L.P.
, supra , 228 Cal.App.4th at p. 951), to apply to claims alleging a violation of section 2924c

. D . Remaining Causes of Action

“ Co urts will ordinarily treat the appellant's failure to raise an issue in his or her opening brief as a waiver of that challenge. ” ( Paulus v. Bob Lynch Ford, Inc. (2006) 139 Cal. App. 4th 659, 685 .) Walker’s opening brief includes no argument concerning the rulings on his causes of action for false light or, although referenced in the brief’s “Issues Presented” section, unfair competition. Nor does it pr esent a legal argument as to a theory of wrongf

ul foreclosure based on section 2924, subdivision (a)(1)(C). Accordingly, w e deem him to have forfeited any challenge to the rulings on those points. “Issues do not have a life of their own: if they are not raised or supported by argument or
citation to authority, we consider the issues waived.” ( Jones v. Superior Court (1994) 26 Cal.App.4th 92, 99.)
DISPOSITION
The order and judgment on demurrer are reversed as to the causes of action for
breach of contract and wrongful foreclosure in violation of secti on 2924c. In all other respects the judgment is affirmed. Walker is entitled to costs on appeal. (Cal. Rules of Court, rule 8.278.)11 _________________________ Siggins, J.

We concur:

_________________________ McGuiness, P.J.

_________________________ Pollak, J.

Walker v. PennyMac, A142849