Court Opinion

ID: 4392711
Source: CourtListenerOpinion
Date Created: 2019-05-01 16:02:16.498646+00
Date Added: 2024-06-11T14:51:53.993956
License: Public Domain

Filed 4/30/19; reposted with page numbers
                                CERTIFIED FOR PUBLICATION

              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                   FIRST APPELLATE DISTRICT

                                            DIVISION TWO

CHARLES TANIGUCHI et al.,
        Plaintiffs and Appellants,
                                                     A152827
v.
RESTORATION HOMES, LLC,                              (San Mateo County
                                                     Super. Ct. No. CIV525919)
        Defendant and Respondent.

        If all or part of the principal secured by a mortgage or deed of trust becomes due
as the result of the borrower’s default in paying interest or installments of principal, Civil
Code section 2924c1 allows the borrower to pay the amount in default, plus specified fees
and expenses, and thereby cure the default, reinstate the mortgage loan, and avoid
foreclosure. The borrowers in this appeal missed four monthly payments on a mortgage
loan that had been modified after an earlier default. The modification deferred certain
amounts due on the original loan, including principal, and provided that any default
would allow the lender to void the modification and enforce the original loan terms. The
question before us is this: to cure the default and reinstate the loan under section 2924c,
must the borrowers pay the amount of the earlier default on the original loan, which had
been deferred under the modification to the end of the loan term, as well as paying the
missed modified monthly payments that caused the default on the modified loan?
        The trial court answered that question “yes,” and on that basis granted the lender’s
motion for summary adjudication on the borrowers’ claim that the lender violated section
2924c. This was error, and we reverse.

        1
            Statutory references are to the Civil Code unless otherwise stated.

                                                 1
                  FACTUAL AND PROCEDURAL BACKGROUND
       In 2006, Charles and Marie Louise Taniguchi (the Taniguchis) obtained a home
loan of $510,500, secured by a deed of trust. In 2009, they agreed to a loan modification
that adjusted the principal amount, reduced the interest rate and monthly payments, and
deferred until the maturity of the loan approximately $116,000 of indebtedness, including
accrued and unpaid interest and principal, fees, and foreclosure expenses. The
modification provided that failure to make modified payments as scheduled would be an
event of default, and that in the event of a default the modification would be null and void
at the lender’s option, and the lender would have the right to enforce the loan and
associated agreements according to the original terms. The modification left unchanged
certain provisions of the original loan documents, including acceleration clauses
authorizing the lender to require a defaulting borrower to immediately pay the full
amount of principal not yet paid and all interest owed on that amount, and to invoke the
power of sale.
       The Taniguchis defaulted on the modified loan, which was eventually assigned to
Restoration Homes, LLC (Restoration Homes). Restoration Homes caused a notice of
default to be recorded in 2013. The Taniguchis were informed that to reinstate their loan
and avoid foreclosure, they would be required to pay their four missed monthly payments
and the associated late charges specified in the modified loan (totaling about $11,000)
and $4,500 in foreclosure fees and costs, plus all the sums that had previously been
deferred under the loan modification. By then, the deferred amount was over $120,000 in
principal, interest and charges (deferred amounts).
       The Taniguchis took exception to the amount Restoration Homes required for
reinstatement of the loan and filed suit in superior court. Shortly after that, Restoration
Homes caused a notice of trustee’s sale to be recorded, which led the Taniguchis to file a
second suit and seek a temporary restraining order to prevent the foreclosure sale. The
temporary restraining order was granted; the two lawsuits were consolidated; and the
consolidated matter was stayed for approximately a year as a result of Charles Taniguchi

                                              2
filing for bankruptcy. Eventually, the Taniguchis filed a third lawsuit, and all three
superior court cases were consolidated.
       As relevant here, the Taniguchis alleged four causes of action against Restoration
Homes: violation of section 2924c by demanding excessive amounts to reinstate the
loan, unfair competition, breach of contract, and breach of the covenant of good faith and
fair dealing. The unfair competition cause of action alleged that Restoration Homes’
violation of section 2924c constitutes a violation Business and Professions Code section
17200 et seq. (the UCL). Restoration Homes sought summary judgment, or in the
alternative summary adjudication. Taniguchis filed a cross motion for summary
adjudication on the causes of action for violation of section 2924c and the UCL.
       The trial court denied the Taniguchis’ motion, granted Restoration Homes’
motions, and entered judgment for Restoration Homes. On appeal, the Taniguchis
challenge the judgment only insofar as it rests on the trial court’s grant of summary
adjudication to Restoration Homes on the Taniguchis’ causes of action for violation of
section 2924c and the UCL.
                                      DISCUSSION
       We review a grant of summary adjudication de novo to determine “whether the
facts not subject to triable dispute warrant judgment for the moving party as a matter of
law.” (Intel Corp. v. Hamidi (2003) 30 Cal.4th 1342, 1348; § 437c, subd. (c).) There is
no dispute as to the relevant facts we summarized above, and we exercise our
independent judgment as to their legal effect.
Applicable Law
       Like the Taniguchis’ loan documents, “[t]he typical form promissory note and
deed of trust provide that upon any default in the trustor’s obligations, the beneficiary
may elect to accelerate the payment of all sums of principal and interest and commence
foreclosure proceedings.” (5 Miller & Starr, Cal. Real Estate (4th ed. 2018) § 13:230, p.
13-938.) The statutory right of reinstatement, set forth in section 2924c, “effectively
modifies the contract provision which permits acceleration upon default.” (Ibid.)

                                              3
       Section 2924c, subdivision (a)(1) provides that when a mortgage loan is
accelerated as a result of a borrower’s default, the borrower can reinstate the loan by
paying all amounts due, “other than the portion of principal as would not then be due had
no default occurred.”2 That is, the borrower can cure the default and reinstate his or her
loan by paying the amount of the default, including fees and costs resulting from the
default, rather than the entire accelerated balance.3 The mortgage lender must inform the
borrower of the correct amount due to reinstate the loan. (Anderson v. Heart Federal
Sav. & Loan Assn. (1989) 208 Cal.App.3d 202, 217.)
       California courts have long recognized the public policy behind the right to
reinstatement, as evidenced by this excerpt from a Court of Appeal opinion from 1949:
“Section 2924c of the Civil Code was first enacted in 1933, during a time of financial
stress and depression throughout the United States. The purpose of the legislation was to
save equities in homes, in many instances built up through years of monthly
payments. . . . [¶] While conditions are fortunately different than they were in 1933, the
protection given by the section to borrowers is just as important now as it was then. The

       2
          “Whenever all or a portion of the principal sum of any obligation secured by
deed of trust or mortgage on real property . . . has, prior to the maturity date fixed in that
obligation, become due or been declared due by reason of default in payment of interest
or of any installment of principal . . . the trustor or mortgagor . . . may pay to the
beneficiary or the mortgagee . . . the entire amount due, at the time payment is tendered,
with respect to (A) all amounts of principal, interest, taxes, assessments, insurance
premiums, or advances actually known by the beneficiary to be, and that are, in default
and shown in the notice of default, under the terms of the deed of trust or mortgage and
the obligation secured thereby, (B) all amounts in default on recurring obligations not
shown in the notice of default, and (C) all reasonable costs and expenses, subject to
subdivision (c), that are actually incurred in enforcing the terms of the obligation, deed of
trust, or mortgage, and trustee’s or attorney’s fees, subject to subdivision (d), other than
the portion of principal as would not then be due had no default occurred, and thereby
cure the default theretofore existing, and thereupon, all proceedings theretofore had or
instituted shall be dismissed or discontinued and the obligation and deed of trust or
mortgage shall be reinstated and shall be and remain in force and effect, the same as if the
acceleration had not occurred.” (§ 2924c, subd. (a)(1).)
       3
        Once a notice of default is recorded, the borrower can reinstate the loan until five
business days before the date of sale set forth in the notice of sale. (§ 2924c, subd. (e).)

                                              4
right to make up payments in default and thus avoid calling the entire loan and sale under
a trust deed is good public policy at any time.” (Magnus v. Morrison (1949) 93
Cal.App.2d 1, 3.)
         The right to reinstate a loan under section 2924c cannot be waived: “Any express
agreement made or entered into by a borrower at the time of or in connection with the
making of or renewing of any loan secured by a deed of trust, mortgage or other
instrument creating a lien on real property, whereby the borrower agrees to waive the
rights, or privilege conferred upon him by Sections 2924, 2924b, 2924c of the Civil Code
. . . shall be void and of no effect.” (§ 2953; see Torrey Pines Bank v. Hoffman (1991)
231 Cal.App.3d 308, 324 [renewals of loans, to which section 2953 applies, include
amendments and modifications of notes or deeds of trust; in contrast, a forbearance
agreement that by its terms did not modify a note or deed of trust was not a renewal to
which section 2953 would apply].)
Analysis
         The Taniguchis contend that under section 2924c, Restoration Homes could not
lawfully condition reinstatement of their loan on the payment of amounts that were
deferred in the loan modification. They argue that requiring them to pay the deferred
amounts, instead of just the missed modified payments plus costs, essentially requires
them to waive their right of reinstatement with respect to the modified loan, in
contravention of section 2953.
         Restoration Homes takes the position that the loan modification gave it the option
to enforce the original loan terms if the Taniguchis defaulted on the modified loan, and
since under the original loan—pre-modification—the deferred amounts were due and
owing, they could properly be required as a condition of reinstatement under section
2924c.

                                              5
       This appears to be a case of first impression.4 We conclude that the Taniguchis
have the better argument. When principal comes due as the result of a default, section
2924c allows a borrower to cure that precipitating default and reinstate his or her loan by
paying the amount of the default, plus fees and expenses. Here, the default is the failure
to make payments on the modified loan. Accordingly, section 2924c gives the
Taniguchis the opportunity to cure their precipitating default (that is, the missed modified
payments) by making up those missed payments and paying the associated late charges
and fees, and in that way to avoid the consequences of the default on the defaulted loan.
Those consequences, of course, would include the demand for immediate payment of the
deferred amounts. Restoration Homes’ position would have the effect of depriving the
Taniguchis of any opportunity to cure the precipitating default and reinstate the modified
loan. Restoration Homes points to nothing in the loan modification documents to suggest
that the Taniguchis had forfeited such an opportunity, nor to anything in section 2924c to
suggest that such a forfeiture would be enforceable even if it were reflected in the loan
documents.
       To counter the Taniguchis’ argument that they have been effectively denied a right
to reinstate their loan, Restoration Homes contends that the deferred amounts have been
due and owing since the Taniguchis’ original default, which preceded the loan
modification. In that way, the deferred amounts (like the four missed modified
payments) are simply part of what must be paid to reinstate the loan, rather than an
impermissible acceleration of amounts then not due. This argument is not persuasive. If
the deferred amounts had actually been due and owing even after the loan was modified,

       4
         In their briefs, the parties debate the extent to which In re Lammy (Bankr.
E.D.Pa. 2006) 356 B.R. 168 is persuasive authority here. In re Lammy arose under 11
United States Code section 1322, subdivision (b)(5), which allows the bankruptcy plan
for a Chapter 13 debtor to provide for the cure of a prepetition payment default. (356
B.R. at p. 172.) The court ruled that under Pennsylvania law and the parties’ agreements,
the debtor could cure a modified loan by paying the arrearage that accumulated under the
modification, rather than by paying that arrearage as well as the arrearage that had
accumulated under the original loan terms before modification. (Id. at pp. 169, 177.)

                                             6
then the Taniguchis would have been in default throughout the term of the modified loan
even if they timely made every required monthly payment. This is inconsistent with the
modified loan agreement dated September 25, 2009, which states, “Lender will bring the
loan due for the October 01, 2009 payment.” (See Orcilla v. Big Sur, Inc. (2016) 244
Cal.App.4th 982, 1001 [in appropriate circumstances, a statement that an agreement
“ ‘will bring your loan current’ ” can reasonably be interpreted to mean that the
agreement cures a past default].) Further, the modified loan agreement is explicit that the
deferred amounts are deferred “to the maturity date of the loan or the date the loan is paid
in full, which ever comes first.”5 Had the Taniguchis made all of their monthly
payments, Restoration Homes could not have claimed the deferred amounts until the end
of the loan, further proof that the deferred amounts were not currently due and owing.
       In sum, on the undisputed facts, Restoration Homes failed to demonstrate that the
Taniguchis could not prevail on their claim that Restoration Homes violated section
2924c, and the trial court erred in granting summary adjudication to Restoration Homes
on this cause of action. We need not reach the Taniguchis’ other arguments on this cause
of action as to the existence of triable issues of fact.6
       We turn briefly to the Taniguchis’ UCL cause of action, which rests on their claim
that Restoration Homes violated section 2924c. The UCL is broad in scope. “[I]t defines
‘unfair competition’ to include ‘any unlawful, unfair or fraudulent business act or
practice.’ ([Bus. & Prof. Code,] § 17200.) . . . By proscribing ‘any unlawful’ business
practice, ‘section 17200 “borrows” violations of other laws and treats them as unlawful
practices’ that the unfair competition law makes independently actionable.” (Cel-Tech
Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180,

       5
           The modified loan defines the “maturity date” as September 1, 2019.
       6
          The Taniguchis also contend that an unpublished order in Charles Taniguchi’s
Chapter 13 bankruptcy proceeding is either persuasive authority or res judicata on the
application of section 2924c. These arguments are not supported by meaningful analysis
or citation to authority, and therefore we treat them as forfeited. (Allen v. City of
Sacramento (2015) 234 Cal.App.4th 41, 52.)

                                                7
fn. omitted.) Restoration Homes argues that undisputed facts demonstrate that it did not
violate section 2924c, but simply exercised its contractual rights under the loan
modification, which as a matter of law cannot constitute an unfair business practice under
the UCL. As we have discussed, however, Restoration Homes failed to show that its
conduct was consistent with section 2924c and its rights under the loan modification;
accordingly, Restoration Homes did not justify the dismissal of the UCL cause of action.
Accordingly, just as it was error to grant summary adjudication on the statutory cause of
action, it was error to grant summary adjudication on the UCL cause of action.
                                     DISPOSITION
       The judgment is vacated. The trial court order granting Restoration Homes’
motion for summary adjudication on the Taniguchis’ causes of action for violation of
Civil Code section 2924c and Business and Professions Code section 17200 et seq. is
vacated, and the matter is remanded for further proceedings consistent with this opinion.
The Taniguchis shall recover their costs on appeal.

                                             8
                                              _________________________
                                              Miller, J.

We concur:

_________________________
Kline, P.J.

_________________________
Richman, J.

A152827, Taniguchi v. Restoration Homes LLC

                                       9
Trial Court: Superior Court of San Mateo County

Trial Judge: Hon. Richard Dubois

Mellen Law Firm, Matthew Mellen, for Plaintiffs and Appellants

Law Offices of Glenn H. Wechsler, Glenn, H. Wechsler, for Defendant and Respondent

A152827, Taniguchi v. Restoration Homes, LLC

                                         10