Ngai v. Valencia

Filed 2/23/07 Ngai v. Valencia CA2/3

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION THREE

APPEAL from a judgment of the Superior Court of Los Angeles County, Terry A. Green, Judge. Reversed and remanded.

Law Offices of Shun C. Chen and Shun C. Chen for Plaintiff and Appellant.

Finer, Kim & Stearns and Robert B. Parsons for Defendants and Respondents.

______________________________________________

Plaintiff Cersia Ngai (plaintiff) appeals from a summary judgment entered in favor of defendants Angel A. Valencia and Carmen Valencia (defendants). The suit concerns defendants nonjudicial foreclosure sale on commercial real property that defendants sold to plaintiff in early 1989. In her suit against defendants, plaintiff alleged that the parties had entered into a forbearance agreement whereby plaintiff was to be given an additional opportunity to bring current her delinquent payments on the purchase price in exchange for sequential extensions of the pending foreclosure sale. She alleged that defendants breached that agreement and thereby caused her to lose the property in a foreclosure sale. In her complaint, she pled four causes of action: (1) breach of contract, (2) breach of the implied covenant of good faith and fair dealing, (3) fraud and (4) conversion of certain personal property.

Our examination of the appellate record shows plaintiff has raised triable issues of material fact that prevent entry of a summary judgment in defendants favor.

FACTUAL AND PROCEDURAL BACKGROUND^[1]

In March of 1989, plaintiff purchased a parcel of real property in Hawthorne, California, from the defendants for the price of $670,000. Plaintiff paid $300,000 down and gave defendants a promissory note for the balance of $370,000. The note was payable over 15 years and was secured by a deed of trust on the property. It appears that plaintiff made timely payments on the note for more than ten years.

During that ten year period, plaintiff leased a portion of the property to a furniture store and spent $200,000 to remodel the remainder of the property so it could be used as a restaurant.

Beginning in July 2000, plaintiff fell behind in her payments on the note. On September 11, 2000, defendants caused a Notice of Default and Election to Sell to be recorded, thus beginning the 90‑day redemption period. Plaintiff failed to bring her payments current within said 90‑day period and, on December 11, 2001, a trustees sale was properly noticed and set for January 3, 2001. At plaintiffs request, that sale was postponed to January 17, 2001. Plaintiff used the additional time to file the first of two bankruptcy proceedings, each of which had the effect of further postponing successively noticed and continued trustee sales of the property. The trustees sale was repeatedly continued until August of 2001 due to the existence of a bankruptcy stay.

Ultimately, apparently in order to remove such bankruptcy stay, defendants, on or about August 16, 2001, entered into a forbearance agreement with plaintiff by which defendants agreed to give plaintiff one final opportunity to avoid a foreclosure sale of her property. Under the agreement, plaintiff promised to make each regular payment on time (i.e., by the 10th of each month) beginning in September 2001 and also to pay a designated amount on the existing arrearage (which at that time was about $37,500). Pursuant to the agreement, defendants consented to a three month extension of the pending August 17, 2001 trustees sale (to November 17, 2001). If plaintiff, performed in a timely manner, then defendants would agree to another three month sale date extension (i.e., to February 17, 2002).^[2] Shortly after the execution of the forbearance agreement, plaintiff, on August 24, 2001, dismissed her bankruptcy petition.

Plaintiff made the promised payments by cashiers checks on September 10 and October 10, 2001. However, she did not make the current and arrearage payments due for November by the 10th of that month. On or about November 25, she mailed her personal checks to the defendants. She claimed that she had overlooked making the November payments until the 24th and then it was too late to obtain cashiers checks. It is not clear when such checks were received by the defendants or whether they were ever cashed or deposited by defendants.

Finding that plaintiff was in default under the terms of the forbearance agreement in that the payments due in November were not made by cashiers checks, defendants proceeded with the trustees sale. That sale was originally scheduled for November 17, but was continued to November 28, 2001. The sale was conducted on that date and defendants apparently made a credit bid and acquired the property at a sale price of $365,448.14.

After the conclusion of the trustees sale, plaintiff filed this action alleging that defendants had breached the forbearance agreement because they went ahead with the sale even though plaintiff had in fact mailed in the November payments by November 25, 2001 (i.e., within the 15‑day grace period) and thus she should have been entitled to another three month extension of the November 17, 2001 trustees sale date. She claims that defendants act of going forward with that sale was a breach not only of the agreement but also the covenant of good faith and fair dealing implied therein. In addition, she alleged a claim for fraud and deceit based on the defendants allegedly false assertions as to the amount of delinquency due and the non‑disclosure of their decision to go forward with the sale. Finally, she alleged a claim for conversion by defendants based on the alleged loss of the personal property in her restaurant.

Defendants moved for summary judgment on all four counts. That motion was granted by the trial court. Plaintiff then filed this timely appeal.^[3]

DISCUSSION

1. Standard of Review

A motion for summary judgment is granted when the parties papers show that there is no triable issue of material fact and the moving party is entitled to a judgment as a matter of law. (Code Civ. Proc.,  437c, subd. (c).) We conduct a de novo review of this matter. (Price v. Wells Fargo Bank (1989) 213 Cal.App.3d 465, 474.) We affirm the judgment if it is correct on any legal ground applicable to this case. (Western Mutual Ins. Co. v. Yamamoto (1994) 29 Cal.App.4th 1474, 1481.)

2. Analysis of the Terms of the Forbearance Agreement

a. The Causes of Action for Breach of the Forbearance
Agreement and Breach of Its Implied Covenant of
Good Faith and Fair Dealing

Under the terms of the forbearance agreement, the promissory note payments and the arrears payments were to be delivered to defendants on or before the 10th of each month hereafter, and plaintiff was to make those payments by cashiers check or money order mailed to defendants home address.^[4] Under the terms of the forbearance agreement, plaintiff was granted a 15-day period to cure each default in such payments.

By simply executing the forbearance agreement, plaintiff received the initial three months sale extension. That is, under the terms of that agreement, the scheduled August 17, 2001 foreclosure sale was postponed for three months.^[5] Moreover, under the terms of the forbearance agreement, so long as plaintiff timely delivered to defendants the required monthly payments for the promissory note and the arrearages, defendants agree[d] to postpone the foreclosure sale for consecutive three month periods.

Plaintiff contends that as long as she made her payments on or before the 25th of each month (which includes her use of the 15-day grace period provided for in the forbearance agreement), she would be entitled to consecutive three‑month forbearance periods. We believe that is a reasonable reading of the agreements as a whole. Her argument finds support in the fact that in paragraph 3 of the forbearance agreement, defendants agreed that they would only terminate the forbearance agreement and conduct the foreclosure sale if plaintiff failed to make her payments on the tenth day of each month and then failed to cure her default within 15 days of the default, that is, by the 25th of the month. In other words, it would be the failure to cure by the 25th of the month that would cause her to lose the benefits she gained by executing the forbearance agreement, and one of those benefits was the right to take advantage of consecutive three-month forbearance periods. That argument also finds support in the fact that when defendants caused the August 17 sale to be continued, they continued it to November 26 (one day past the 25th), not to November 18.

Plaintiff contends that having made the required September payments by September 25 and the October payments by October 25 (which she did by means of cashiers checks), she was current in her payments on November 17 when the original three-month forbearance period ran out, and therefore she was entitled to another three-month forbearance period, which would end on February 17, 2002, and on that basis, the foreclosure sale could not take place until at least that date. Thus, her argument goes, it is not relevant whether she made her November 2001 payments by November 10, 17, 25, or even by the date of the foreclosure sale, and therefore, by conducting a foreclosure sale on November 28, 2001, the defendants breached the written forbearance agreement and plaintiffs duties under that agreement came to an end. She filed this action for damages on November 17, 2003.^[6]

Plaintiffs argument, however, demonstrates a fundamental misreading of the forbearance agreement. In order to be able to enforce the promise of a second three month extension of the trustees sale, it was necessary that she also make the November 2001 payment in a timely manner; that is by no later than the 10th of November or within the 15‑day grace period allowed under the agreement. Under paragraph 3 of the forbearance agreement, it is the failure to cure defaults by the 25th of a month that would give defendants the right to declare the end of the forbearance agreement and foreclose on the subject property.^[7][8]

We reject plaintiffs contention that the forbearance agreement violates the provisions in Civil Code section 2924c, subdivision (a), which give trustors the right to redeem their property rights by curing their default. The record shows that prior to the time the forbearance deed was drawn up, defendants gave plaintiff two weeks time beyond the statutory period to make a payment. Instead of making the payment, she filed her initial bankruptcy petition, and then filed the second bankruptcy.^[9] By the time she signed the forbearance agreement, the statutory redemption period had long since passed. Plaintiff cites no authority for the notion that the agreement to provide successive three-month sale extensions brought the forbearance agreement within the provisions of Civil Code, section 2924c, thus giving her a new right of redemption. The forbearance agreement merely provided for a last chance protocol by which plaintiff could earn successive extensions of an already properly scheduled and noticed trustees sale. It gave no rights beyond that.

However, although we reject plaintiffs analyses of the terms of the forbearance agreement and its validity, we also reject defendants contention that the state of the evidence demonstrates they are entitled to a summary adjudication on the causes of action for breach of the forbearance agreement and breach of the implied covenant. Plaintiff has raised a triable issue of material fact regarding whether her submission in November 2001 of her personal checks can be found to constitute substantial compliance with the requirements of the forbearance agreement. There is no evidence from defendants showing that there were insufficient funds in plaintiffs checking account to cover those checks. Thus, at this point, it remains an issue of fact whether plaintiff breached the forbearance agreement by her November payment or defendants breached it by foreclosing on the property.

b. The Cause of Action for Fraud

The cause of action for fraud alleges that the past-due amount stated in defendants September 2000 notice of default was inflated by some $5,000, for the purpose of making it difficult for plaintiff to cure her default. Plaintiff alleged that Defendants have not been able to substantiate the inflated amount and to provide a true amount. She also alleged that between January 2001 and August 16, 2001, defendants added, to that alleged amount due, duplicate, inflated, and unlawful charges, and when defendants presented plaintiff with the forbearance agreement on August 16, they falsely represented to plaintiff the amount that plaintiff owed; and they used the forbearance agreement to induce plaintiff to dismiss her bankruptcy. Plaintiff alleges that she signed the forbearance agreement on defendants representation that she owed the money stated in that agreement, and she did not know the falsity of that representation, and had she known of their false representation, she would not have signed the agreement.

There are five elements of actionable fraud. They are (1) a misrepresentation by false representation, concealment, or nondisclosure; (2) knowledge of the falsity; (3) an intent to defraud, i.e., to induce reliance; (4) justifiable reliance on the misrepresentation; and (5) resulting damage. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.)

Plaintiff stated in her declaration that sometimes defendants had her mail her promissory note payments to them and other times to a third party processing facility, and defendants and their agents frequently failed to send a statement to her. She also stated that defendants and/or their agents arbitrarily levied late fees, and refused to explain why the late charges were imposed, and for what month they were imposed, when she questioned them. Regarding the late fees, she stated she became aware sometime in the year 2000 that the late fees were being improperly levied, and when she asked defendants to rescind them, defendants refused. She also became aware some time in 2000 that defendants or their agents were failing to appropriately allocate her payments to both principal and interest, and when she asked defendants to correct the allocations, they failed to look into the matter. She did not keep a record of her payments. Moreover, plaintiff stated that since defendants initiated their foreclosure, she repeatedly asked them, and their trustee, defendant Sentinel, to provide her with a statement, and the accurate amount she owes, and defendants failed to respond after promising to give her an answer, or responded with a grossly inflated amount of money owed, all for the purpose of discouraging her from bringing her payments current, so that they could seize the property.

Plaintiff also stated that defendants faxed her the forbearance agreement on August 16 and told her to sign it or the foreclosure sale would take place the next day, and at that time she was not informed that her bankruptcy petition could prohibit the sale because the attorney who was representing her then was either incompetent and failed to advise her of her rights, or the attorney apparently secretly corroborated with [defendants] attorney. Plaintiff asserted she signed the forbearance agreement without having sufficient time to review it, and she was not aware that defendants intended to trap her into signing an agreement with inflated charges, and lure her into dismissing her bankruptcy petition, so that they could seize her property through an alleged foreclosure. So, on August 24, she asked her attorney to dismiss her bankruptcy because she believed defendants would abide by the forbearance agreement and postpone the sale of the property.

Plaintiff has raised a triable issue of material fact regarding whether defendants misrepresented to her the amount of arrearages (principal, interest, late fees, etc.), she owed, and thus a question arises whether defendants can rely on the forbearance agreement to support their foreclosure.^[10]

c. The Cause of Action for Conversion

Lastly, since defendants moved alternatively for summary judgment, or summary adjudication on plaintiffs individual causes of action, adjudication in their favor was proper on plaintiffs cause of action for conversion. In its common allegations, plaintiffs complaint alleges plaintiff spent about $200,000.00 to remodel [a] portion of the [subject real p]roperty for a Chinese restaurant, and leased both the premise [sic] and the personal properties [sic] to a third party to operate a restaurant. Plaintiff alleges in her cause of action for conversion that (1) she is entitled to all of the improvements, furnishings, furnitures [sic], and fixtures inside the Property, (2) such personal property had a value of $150,000 on November 28, 2001 when the foreclosure sale took place, (3) when defendants purchased the real property at the foreclosure sale, they converted the personal property there to their own use, and (4) plaintiff demanded the immediate return of the personal property but defendants refused to return it. In her response to number 21 in defendants separate statement of undisputed material facts (which states that plaintiff had an agreement with her tenant for the lease of personal property), plaintiff responded that she did not dispute number 21 to the extent that the lease included both the restaurant and personal properties [sic] therein. It is clear to this court that the personal property alleged to have been converted by defendants is that associated with the restaurant.

Conversion is the wrongful exercise of dominion over the property of another. The elements of a conversion claim are: (1) the plaintiffs ownership or right to possession of the property; (2) the defendants conversion by a wrongful act or disposition of property rights; and (3) damages. Conversion is a strict liability tort. The foundation of the action rests neither in the knowledge nor the intent of the defendant. Instead, the tort consists in the breach of an absolute duty; the act of conversion itself is tortious. Therefore, questions of the defendants good faith, lack of knowledge, and motive are ordinarily immaterial. (Burlesci v. Petersen (1998) 68 Cal.App.4th 1062, 1066.)

In their declarations, defendants stated that after they received plaintiffs November 30, 2001 letter asking for reinstatement, they did not receive any further communication from her, and she has never asked their help to retrieve the items of personal property that she leased to her tenants. This assertion conflicts with defendants response to number 64 in plaintiffs separate statement. Number 64 states: After defendants seized my Property, Plaintiff requested [sic] [defendants] to return her personal properties [sic] inside the restaurant on the Property. [Defendants] did not return Plaintiffs telephone calls, and did not return any of Plaintiffs personal property therein. Defendants response to number 64 was undisputed. In her declaration, plaintiff stated that when she asked defendants to return that restaurant personal property, they did not return her telephone calls and did not return her property.

If we only had the parties declarations and their treatment of number 64 in plaintiffs separate statement to consider, we would conclude that defendants agreed that they resisted facilitating the return of plaintiffs personal property such that they could be considered to have converted it. However, there is other additional evidence before us.

At plaintiffs deposition (taken several months prior to the parties filing of their summary judgment papers), when she was asked if she ever requested defendants to return her personal property in the restaurant, she responded that defendants refused to answer their telephone each time she called. As a follow up question, she was asked if she ever left a message for them, she stated she did and she told them she would like to speak with them. Pursuing this topic, defendants attorney asked plaintiff if she ever left a message specifically telling defendants she wanted her personal property returned, and plaintiff answered that she could not remember if she did. Moreover, she admitted at her deposition that such property was actually leased to her lessee who runs the Chinese restaurant and when she asked that lessee for her personal property back, the lessee told her he was still operating the restaurant and if she took her personal property out of the restaurant he could not operate it, so at that time I just let it go. Plaintiff stated she planned to ask the lessee for her equipment back in the future.

Plaintiffs deposition testimony is evidence that even if plaintiff did ask defendants to return her personal property and they refused, their refusal is not a cause of damages to plaintiff since plaintiff was willing to let the personal property remain with the lessee of the restaurant. Therefore, defendants were entitled to summary adjudication on the conversion cause of action.

DISPOSITION

The summary judgment is reversed and the cause is remanded for further proceedings consistent with the views expressed herein. Costs on appeal to plaintiff.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

CROSKEY, J.

We Concur:

KLEIN, P. J.

KITCHING, J.

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Analysis and review provided by Escondido Property line attorney.

^[1] The facts we allege are taken either from the plaintiffs complaint or from the papers filed by the parties in support and opposition to the defendants motion for summary judgment and which the record demonstrates are not disputed.

^[2] A copy of the forbearance agreement is attached to plaintiffs original complaint. Apparently it was drafted by or on behalf of defendants.

It states that pursuant to the deed of trust given to defendants by plaintiff, she was obligated to make monthly payments of $3,523.62, and as of the date of the forbearance agreement, she was in default in the amount of $37,546.29. The forbearance agreement further states that, based on plaintiffs default, a foreclosure sale was set for August 17, 2001, but the parties agreed that such sale would be postponed under the following conditions. In addition to the monthly payment that plaintiff was required to make pursuant to the promissory note, plaintiff would also make a monthly payment of $1,185.23 over the course of 30 months, and payment of $2,370.46 for months 31‑33. These 33 additional payments (the arrears payments), included interest on the arrearages. The two monthly payments (promissory note payment and arrears payment) were to be made on or before the 10th of each month. The forbearance agreement appears to state that only the arrears payments would have to be made by cashiers check or money order and mailed to defendants home address, however, we assume that it was intended that both payments were to be paid in that manner.

To secure the successive three-month forbearance periods, the forbearance agreement required plaintiff to timely deliver to defendants the payments under the promissory note and arrears payments, make the property tax and insurance payments for the property, and perform the other obligations required of her under the promissory note and deed of trust and the forbearance agreement.

The forbearance agreement provided that if plaintiff defaulted on those terms and failed to cure the default within 15 days of the default, defendants had the right to terminate the forbearance agreement without any right of reinstatement by plaintiff, and defendants would be free to proceed with their foreclosure sale at the earliest date permitted by law, and pursue any other remedies available to them. Under the forbearance agreement, plaintiff specifically agreed that defendants would not be required to provide her with a written notice of default, and she waive[d] presentment of any and all such notices.

^[3] We discuss plaintiffs contentions on appeal in the Discussion section of this opinion.

^[4] Defendant Carmen Valencia stated in her declaration that plaintiff has a history of sending defendants checks that were returned for insufficient funds and then not paying the late charges, and for that reason, the forbearance agreement required plaintiff to pay by cashiers check or money order. Nevertheless, as discussed infra, there is no indication that plaintiffs November 2001 checks were not in substantial compliance with the forbearance agreement.

^[5] According to declarations from the trustees custodian of records and declarations from employees or agents of the company that conducts foreclosure sales for the trustee, the August 17, 2001 foreclosure sale was actually continued to November 26, 2001, by mutual agreement of the parties. In her declaration filed in support of her opposition to defendants motion for summary judgment, plaintiff stated no one informed her that the sale was postponed to November 26, and then postponed again to November 27 and November 28, when it was finally held. However, given the facts of the case, as addressed below, this failure to inform, if true, does not impact our analysis of the validity of the summary judgment.

^[6] Plaintiff states in her declaration that she attempted to obtain cashiers checks on November 24 but was not able to get to the bank before it closed and so she sent personal checks to defendants instead. She states defendants did not return those checks. The defendants state in their respective declarations that two days after the foreclosure sale took place they found a letter from plaintiff that was dropped off at their house while [they] were away and in that letter plaintiff asked to have the forbearance agreement reinstated. Defendants do not mention the personal checks.

^[7] Plaintiffs payments were due by November 26, not November 25. November 25 was a Sunday and therefore plaintiff had to November 26 to cure her default. (Code Civ. Proc., 10 & 13.)

^[8] The record shows the foreclosure sale was originally set for January 3, 2001, at the Los Angeles County courthouse in Norwalk, California. According to declarations filed by defendant Carmen Valencia, and by the president of Sentinel (the trustee), and the various employees/agents of the company that the trustee retained to actually conduct the sale (Fidelity National Agency Sales and Posting), the sale was postponed eleven times between January 3 and August 17, most of those times because of plaintiffs two bankruptcy proceedings, and the other times by mutual agreement of the parties, and on each of the days on which a postponement was made, one of the employees/agents of Fidelity National Agency Sales and Posting appeared at the courthouse in Norwalk and announced that the sale was being continued, and announced the new sale date, including that the sale was continued from August 17 to November 26, by mutual agreement of the parties, from November 26 to November 27, by mutual agreement, and from November 27 to November 28 at the request of the defendants. The record also contains the notice of default and election to sell under the deed of trust, which was recorded on September 11, 2000, and the trustees deed of sale. The deed of sale states that the property was sold to defendants at a public auction on November 28, 2001, and that the defendants were the highest bidder at the sale. Absent evidence to the contrary (and there is none), such declaratory and documentary evidence is sufficient to find that the sale was conducted as a public sale, after duly announced continuances of the sale.

Although plaintiff submitted evidentiary objections to defendants evidence (and defendants submitted evidentiary objections to certain of plaintiffs evidence), the record does not contain the trial courts ruling on those objections (assuming such a ruling was made). We therefore do consider the evidence to which objections were made. (Ann M. v. Pacific Plaza Shopping Center (1993) 6 Cal.4th 666, 670, fn. 1.)

^[9] Plaintiff stated in her declaration that she was advised to dismiss her first bankruptcy petition and refile her petition because it was the only way to deal with the fact that her first bankruptcy attorney provided the bankruptcy court with an erroneous social security number for her.

^[10] Although plaintiffs opening brief on appeal addresses asserted violations of the nonjudicial foreclosure statutes as grounds for reversing the summary judgment, she did not allege such violations in her complaint. The parties pleadings provide the issues in a motion for summary judgment. (FPI Development, Inc. v. Nakashima (1991) 231 Cal.App.3d 367, 381.) Thus, although defendants contend the summary judgment can be affirmed because plaintiff never offered to pay the full amount she owed to defendants, and because they presented evidence they complied with the procedural requirements of the nonjudicial foreclosure statutes, plaintiffs suit is not a direct attack on the foreclosure sale vis‑‑vis the provisions of the nonjudicial foreclosure statutes. It is an attack based on the forbearance agreement and alleged distortions by defendants of the amount of money she owed them.