Pestana v. Bank of America, 2014 WL 2616840, No. A137566
(Cal. Ct. App. June 12, 2014)
Pestana sued his mortgage loan servicers (BoA) after BoA
denied his application for a loan modification under the federal Home
Affordable Mortgage Program (HAMP), and instead offered him an allegedly less
favorable in-house modification, which he accepted. He alleged that BoA
representatives made misrepresentations about the requirements and availability
of a HAMP modification, breached promises to modify his loan, improperly
stalled the modification review process, and incorrectly denied his application
for a HAMP modification. The trial court
dismissed all his claims, but the court of appeals revived his UCL claim.
The breach of an oral agreement claim was dismissed because
there was no writing signed by BoA, despite the alleged oral promise to review
Pestana’s application/modify his loan.
The only letter he received just listed documents he should send in and
didn’t make promises.
The promissory estoppel claim relied on oral statements made
by BoA representatives during three telephone conversations, but none of these
was enough to make a clear and unambiguous promise supporting a claim for
promissory estoppel. Pestana first
alleged that a BoA representative named Bob told him that, if he became
delinquent on his mortgage payments, he would receive a loan modification. But
he didn’t allege that Bob promised a HAMP modification, and he alleged that he
only learned about HAMP later. Offering
an in-house modification fulfilled any general promise of a modification. Then, Pestana alleged that a BoA rep named
Denise told him he’d be evaluated for a HAMP modification if he returned the
appropriate form and supporting documentation, and that this implied that BoA’s
evaluation would be conducted in good faith.
But this too was not a clear and unambiguous promise that BoA would
conduct its evaluation in a particular manner. And BoA fulfilled its general promise to
evaluate Pestana’s application, ultimately rejecting it. Finally, Pestana alleged that a rep named
Shawn told him that BoA had received all the required documentation and that
the review process would begin immediately, which he alleged implied good faith
review. The court found no express promise about how the review would be
conducted.
Intentional misrepresentation claims were also
dismissed. They’re a variety of fraud
claims. The allegations didn’t establish
that the reps made false promises or promises without any intention of performing
them. Requests by BoA for additional
documentation and BoA’s denial of his application didn’t themselves involve
false representations or false promises, except for (allegedly) BoA’s statement
that Pestana didn’t qualify for a HAMP modification, and Pestana didn’t believe
or rely on that.
However, the UCL claim was different. BoA allegedly
(1) told borrowers, including
Pestana, that, if (and only if) they stopped making mortgage payments, they
could apply for loan modifications and Bank would review their applications in
good faith, (2) promised Pestana he would be granted a modification, (3)
stalled the review process for Pestana and other borrowers, including by
requesting documents Bank had already received, and (4) falsely represented to
qualified borrowers, including Pestana, that they did not qualify for HAMP
modifications.
BoA argued that Pestana lacked standing. But Pestana alleged that he incurred late
fees and penalties after he stopped making (and continued to withhold) his
mortgage payments in reliance on BoA’s representations about the availability
and requirements of a loan modification. That was enough to show economic injury and
causation at this stage. Pestana alleged
that he stopped making mortgate payments “after (and in reliance on)
representations in June 2009 by a [BoA] representative that (1) [BoA] could not
help him with a loan modification as long as he was current on his payments,
and (2) if he were to miss his payments, he would receive a modification.” His default and late fees could thus be
traced to BoA.
BoA argued that Pestana was contractually obligated to pay
late fees if he missed mortgage payments and thus couldn’t count them as
injury. Even if the note so provided,
that didn’t mean Pestana suffered no economic injury: he wouldn’t have become
obligated to pay the late fees if he hadn’t stopped paying. BoA also argued that Pestana ultimately
received an in-house loan modification, but at the pleading stage the court
wasn’t going to determine the factual question of whether this was enough
benefit to match or outweigh his loss.
UCL “fraudulent” conduct: This doesn’t require the elements
of the common-law tort of fraud, but rather only requires a showing that
members of the public are likely to be deceived. Pestana sufficiently alleged that BoA made
untrue or misleading representations that were likely to deceive reasonable
consumers, such as that modifications would only be possible if he stopped
making mortgage payments. Then BoA
allegedly stalled the review process, racking up extra late fees and penalties
that benefited BoA as servicer. And BoA
allegedly falsely told Pestana and other borrowers they did not meet the
eligibility requirements for HAMP modifications. At the demurrer stage, the court couldn’t
determine that BoA’s statements were accurate and nonmisleading.
Clean-up: the absence of a federal right of action under
HAMP didn’t bar the UCL claim. There was no indication that federal law displaced state remedies.
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