Filed 10/13/17 Steele v. Bank of America CA3

NOT TO BE PUBLISHED

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

THIRD APPELLATE DISTRICT

(Placer)

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Following a series of civil actions and a flurry of bankruptcy filings, plaintiffs Christian M. and Shirley C. Steele brought suit against defendant Bank of America, N.A. (Bank of America) alleging causes of action stemming from the foreclosure of their property by the lender. The trial court granted Bank of America’s motion for judgment on the pleadings without leave to amend. The Steeles appeal, arguing they sufficiently pled their first three causes of action. We shall affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

In January 2008 the Steeles borrowed $4,425,000 from Bank of America. The Steeles secured the loan with a deed of trust on their property. After approximately a year, the Steeles stopped repaying the mortgage loan. In June 2010 Bank of America purchased the property at foreclosure.

Bank of America evicted the Steeles from the property in September 2011. However, the Steeles occupied the property for many years, even after Bank of America obtained a judgment of possession.[1]

After filing for bankruptcy, the Steeles filed a civil action against Bank of America in 2012.[2] The Steeles alleged Bank of America induced them to fall behind in their mortgage payments and promised a loan modification. The trial court sustained a demurrer to the Steeles’ first amended complaint without leave to amend and dismissed the action. We dismissed the Steeles’ appeal for lack of jurisdiction.[3]

Christian Steele filed for bankruptcy again in 2013.[4] Bank of America filed an unlawful detainer complaint against the Steeles the same year. The trial court granted judgment in Bank of America’s favor and awarded it a writ of possession of the property in September 2013.

In February 2014 the Steeles filed a civil suit against Bank of America alleging wrongful eviction. They dismissed the action with prejudice.

Subsequently, the Steeles allege they entered into negotiations with Bank of America to repurchase the property in which they had continued to reside for four years after the foreclosure sale. According to the Steeles, they offered to purchase the property for the current fair market value of $2.2 million. However, Bank of America sold the property to Vertical Infill, Inc. for $1.4 million, which was $800,000 less than the Steeles’ offer. The Steeles state that their $2.2 million offer for the property was a bona fide all cash offer. The Steeles filed for bankruptcy several more times in 2014 and 2015.

In March 2015 the Steeles filed the complaint at the heart of this appeal. The complaint asserted four causes of action: (1) breach of the implied covenant of good faith and fair dealing/duty to accept offer for purchase of real property; (2) breach of the Federal Housing Finance Agency (FHFA) mandate requiring lenders to sell foreclosed homes to foreclosed-upon owners for fair market value; (3) violation of Business and Professions Code section 17200 et seq. (the unfair competition law, or UCL); and (4) wrongful issuance of notice of default and trustee’s deed.[5] In essence, the Steeles contend Bank of America breached an implied covenant of good faith and fair dealing by selling the property to Vertical Infill, Inc. for $1.4 million when the Steeles offered to purchase it for $2.2 million.

Bank of America filed a motion for judgment on the pleadings. The trial court granted the motion and entered judgment. Following entry of judgment, the Steeles filed a timely notice of appeal.

DISCUSSION

Standard of Review

A motion for judgment on the pleadings may be granted when the complaint does not state sufficient facts to constitute a cause of action. (Code of Civ. Proc., § 438, subd. (c)(1)(B)(ii).) It is similar to a demurrer, but brought after the time for filing a demurrer has expired. (Code of Civ. Proc., § 438, subd. (f)(2).)

We apply the de novo standard of review. (International Assn. of Firefighters, Local 230 v. City of San Jose (2011) 195 Cal.App.4th 1179, 1196.) We deem all alleged facts to be true and we give the pleading a reasonable interpretation by reading it as a whole, liberally construing the pleading with a view to attaining substantial justice. (Ludgate Ins. Co. v. Lockheed Martin Corp. (2000) 82 Cal.App.4th 592, 602.)

We assume the truth of all facts properly pleaded in the complaint or reasonably inferred from the pleading. We do not assume the truth of mere contentions, deductions or conclusions of law. (Scott v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 743, 751.) In addition, we consider facts of which the trial court properly took notice. (Ibid.) Finally, we determine if those facts are sufficient, as a matter of law, to state a cause of action under any legal theory. To prevail on appeal, a plaintiff must demonstrate error by showing the properly pleaded facts are sufficient to establish each element of a cause of action and to overcome all legal grounds of objection whether or not raised in the trial court. (Id. at p. 752.)

We review the trial court’s denial of leave to amend for abuse of discretion. (Vaca v. Wachovia Mortgage Corp. (2011) 198 Cal.App.4th 737, 743.) The plaintiff must show how the complaint can be amended and how amendment will change the legal effect of the pleading. (Rakestraw v. California Physicians’ Service (2000) 81 Cal.App.4th 39, 43.)

Breach of the Implied Covenant of Good Faith and Fair Dealing

The Steeles allege Bank of America breached the implied covenant of good faith and fair dealing when it failed to negotiate with them so the Steeles could purchase their foreclosed home at a fair market value. According to the complaint, they “offered to purchase the Property from Bank of America . . . for the then current fair market value of $2.2 million dollars.” Instead, Bank of America “sold the Property to Defendant Vertical Infill, Inc. for $1.4 million dollars which was $800,000 less than plaintiff[s’] offer.”

A breach of the covenant of good faith and fair dealing permits recovery in contract. (Spinks v. Equity Residential Briarwood Apartments (2009) 171 Cal.App.4th 1004, 1054.) Here, the trial court determined that “[s]uch a claim, however, requires a plaintiff allege a valid contract between the parties. Moreover, the implied covenant cannot be extended to create obligations not contemplated by the contract. [Citation.] Plaintiffs do not sufficiently allege the underlying contract that purportedly supports the cause of action. [¶] So far as it is implied that the deed of trust and note are the purported contract, there are insufficient facts alleged to establish the creation of such an obligation. For these reasons, the first cause of action fails.”

We agree with the trial court’s assessment. The Steeles fail to specify the contract under which they seek to assert the breach of the covenant of good faith and fair dealing. Instead, they contend: “Logically the implied covenant applies when there is not a contract but the parties are negotiating a contract. A party to an actual contract already has a remedy for breach thereof and thus the implied covenant applies in unique circumstances such as the one alleged in this action. There is no authority that requires anyone to enter into a contract with another party or even to negotiate fairly. However when unique circumstances arise and the party [sic] breach what the implied covenant stands for then a cause of action is so stated. The facts of the instant action set forth such circumstances so as to state a cause of action.” Notably, the Steeles provide no support for this assertion and legal precedent undercuts their argument.

The covenant of good faith and fair dealing does not exist independently of the underlying contract. Indeed, the prerequisite for any breach of good faith and fair dealing is the existence of a contractual relationship between the parties. (Molecular Analytical Systems v. Ciphergen Biosystems, Inc. (2010) 186 Cal.App.4th 696, 712; Smith v. City and County of San Francisco (1990) 225 Cal.App.3d 38, 49.) The implied covenant must rest upon the existence of a specific contractual obligation. (Racine & Laramie, Ltd. v. Department of Parks & Recreation (1992) 11 Cal.App.4th 1026, 1031.) As the trial court correctly found, the Steeles fail to allege the underlying contract that supports the cause of action for breach of the implied covenant.

Breach of the FHFA Directive

The Steeles’ second cause of action alleges Bank of America violated an FHFA directive in refusing to sell them the foreclosed property.[6] Under this directive, the Steeles argue, a foreclosed homeowner who still has possession and resides in the property more than three years after the foreclosure sale has the right to purchase the property for the fair market value.

The trial court found: “The allegations, however, are so conclusory and general in nature that it cannot be ascertained what federal mandate is being invoked or plaintiffs’ standing to sue under such a purported mandate. The second cause of action is also insufficiently pled.”

Faced with this discrepancy, the Steeles reply: “Defendant’s motion alleged there is no allegation Bank of America is subject to the directive issued by FFHA [sic] or that plaintiff has standing. However, Bank of America set forth no authority that it is not subject to the FFHA [sic] or that plaintiff did not have standing.”

The Steeles misunderstand where the burden falls. “The burden is on the plaintiff seeking to establish that a private right of action exists.” (Opera Plaza Residential Parcel Homeowners Ass’n. v. Hoang (9th Cir. 2004) 376 F.3d 831, 835.) In addition, a private right of action to enforce a federal law must be unambiguously conferred by Congress. (Armstrong v. Exceptional Child Center, Inc. (2015) 575 U.S. ___, ___ [135 S.Ct. 1378, 1387-1388].) The Steeles provide no facts to support a private right of action under the FHFA and the trial court did not err in finding the cause of action insufficiently pled.

UCL Claim

Finally, the Steeles contend the trial court erred in granting the motion for judgment on the pleadings as to their UCL claim. The trial court found: “Plaintiffs’ complaint does not sufficiently allege any unfair, unlawful, or fraudulent acts on the part of defendants.” We agree.

The UCL does not proscribe any specific activities, but instead prohibits any unlawful, unfair or fraudulent business act or practice and unfair, deceptive or misleading advertising. By proscribing any unlawful business practice, Business and Professions Code section 17200 borrows violations of other laws and considers them unlawful practices that the law against unfair competition makes independently actionable. Business and Professions Code section 17200 establishes three categories of unfair competitions: acts which or unlawful, or unfair, or fraudulent. A practice is prohibited as unfair or deceptive even if it is not unlawful and vice versa. (Puentes v. Wells Fargo Home Mortgage, Inc. (2008) 160 Cal.App.4th 638, 643-644.)

In response, the Steeles simply state: “As demonstrated above, the FAC [first amended complaint] allegations sufficiently form the basis for Appellants’ [Business and Professions Code section] 17200 cause of action. [¶] Paragraph 48 of the Complaint alleged: [¶] ‘48. Unfairness: The totality of Defendants’ conduct as alleged throughout this Complaint was inherently unfair to Plaintiffs as it was against public policy, immoral, unethical, oppressive, unscrupulous and substantially injurious to Plaintiffs, specifically, and consumers, in general. Additionally, Defendants’ conduct as described throughout this Complaint was unfair in that the negative impact on Plaintiffs as described above far outweighs any benefit to Defendants. Additionally, Defendants’ conduct is likely to mislead the general public.’ [¶] It is this unfairness prong of [Business and Professions Code section] 17200 on which the court erred in dismissing this cause of action.”

The Steeles fail to cite any specific facts or authority to support their UCL claim. We cannot assume the task of rooting out the alleged error in the trial court’s ruling. It is counsel’s responsibility to state, through argument and citations to authority, why the trial court erred. We consider contentions supported by neither argument nor citation to authority to be without foundation and waived. (In re Phoenix H. (2009) 47 Cal.4th 835, 845.) Given the dearth of argument or facts, we find the trial court did not err in granting the motion as to the UCL cause of action.

Denial of Leave to Amend

The trial court also granted the motion for judgment on the pleadings “without leave to amend as plaintiffs have not made a sufficient showing that the deficiencies may be cured by an amendment.” The court’s denial of leave to amend was not an abuse of discretion.

The Steeles bear the burden of demonstrating how they could amend to cure their complaint’s defects. (Rakestraw v. California Physicians’ Service, supra, 81 Cal.App.4th at p. 43.) However, their brief fails to explain how they can amend their complaint or propose any additional facts or authority to support their claims.

DISPOSITION

The judgment is affirmed. Bank of America shall recover costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1) & (2).)

RAYE , P. J.

We concur:

NICHOLSON , J.

HOCH , J.