No. B225449.

TRACEY HAMPTON-STEIN, et al., Plaintiffs and Appellants, v. ONEWEST BANK, Defendant and Respondent.

Court of Appeals of California, Second District, Division Five.

Attorney(s) appearing for the Case

Philip A. Kramer , Erikson M. Davis and Mitchell J. Stein , for Plaintiffs and Appellants.

Allen Matkins Leck Gamble Mallory & Natsis, Charles D. Jarrell and Joshua R. Mandell for Defendant and Respondent OneWest Bank.




This is an appeal from a judgment entered after the trial court sustained without leave to amend the demurrers of defendant, OneWest Bank, to an action alleging conversion, breach of contract, and the lack of compliance with the Perata Mortgage Relief Act (Civ. Code1 § 2923.5).2 We affirm that portion of the judgment sustaining defendant's demurrers to causes of action for section 2923.5 and breach of contract without leave to amend. We reverse the order sustaining the demurrer on the claim of conversion.


The operative pleading in this case is the second amended complaint, which was brought by several plaintiffs.3 Those plaintiffs are: Tracey Hampton-Stein, formerly doing business as Robany, Inc. ("Ms. Hampton-Stein"); Robert and Janece Murray ("the Murrays"); Scott and Lisa Moore (" the Moores"); and Rick and Karen Scott ("the Scotts"). OneWest Bank is the sole defendant named in the second amended complaint. The second amended complaint contains causes of action for violations of section 2923.5 (first through third), conversion (fourth), and breach of oral contract (fifth).

In reviewing an order after a demurrer is sustained without leave to amend, all well-pleaded factual allegations must be assumed as true. (Naegele v. R. J. Reynolds Tobacco Co. (2002) 28 Cal.4th 856, 864-865.) The first through third causes of action are brought by the Murrays, the Moores, and the Scotts respectively. These plaintiffs all allege that they owned residences which OneWest foreclosed on in violation of section 2923.5. Ms. Hampton-Stein does not claim a direct violation of section 2923.5 but an indirect one which allegedly occurred on the basis of an oral agreement.

In the first cause of action, the Murrays, allege OneWest foreclosed on their home without first following the requirements of section 2923.5 The Murrays allege they were "foreclosed out of their home after representatives of [OneWest] told the Murrays that they looked forward to meeting the non-profit company helping them negotiate a [loan] modification . . . . " In the second cause of action, the Moores allege that OneWest personnel had conversations with them about how to qualify and receive a loan modification and orally agreed to a loan modification, but then retracted and refused to undergo any further meetings with the Moores. The Moores allege OneWest's refusal to allow for a meeting after retracting their oral loan modification agreement violated section 2923.5.

The third cause of action alleges that representatives of OneWest's predecessor, Indy Mac Bank, suggested a loan modification to the Scotts. The suggestion was made even though the Scotts had never missed a mortgage payment. However, when OneWest started servicing the loan, the Scotts were told there would be no more loan modification offers. Thereafter, a OneWest employee allegedly "suggested" the Scotts could qualify for a loan modification if the Scotts "became delinquent" on a few payments. The Scotts followed this advice and they allege OneWest filed a notice of default without complying with section 2923.5.

The fourth (conversion) and fifth (breach of contract) causes of action are brought by Ms. Hampton-Stein. Ms. Hampton-Stein alleges she owned one property in Arizona and one property in California. The properties had loans, which were serviced by OneWest. The second amended complaint concedes that neither the Arizona nor California property was subject to the requirements of section 2923.5. However, she alleges she entered an oral contract with OneWest's predecessor, Indy Mac Bank, to forego seeking alternative refinancing with other lenders in exchange for loan modification discussions in compliance with section 2923.5. OneWest assumed the terms of the oral contract and breached the oral contract by not complying with section 2923.5 before initiating foreclosure proceedings.

In the conversion claim, Ms. Hampton-Stein alleges she owned expensive audio-visual equipment and furniture which she kept in her Arizona home. After she filed this action, representatives of OneWest broke into her Arizona property and stole all of the audio-visual equipment by placing it in trucks and driving it away from the home.

On April 9, 2010, OneWest filed a notice of demurrer to all causes of action for failure to state sufficient facts. On June 2, 2010, the trial court sustained the general demurrers without leave to amend on the ground that plaintiffs failed to allege sufficient facts and also failed to demonstrate they could amend the pleading to cure the defects. Plaintiffs filed a timely notice of appeal from the judgment dismissing the complaint.


A Standard of Review

`"Our only task in reviewing a ruling on a demurrer is to determine whether the complaint states a cause of action . . . .'" (People ex rel. Lungren v. Superior Court (1996) 14 Cal.4th 294, 300.) We assume the truth of allegations in the complaint which have been properly pleaded and give them a reasonable interpretation by reading the complaint as a whole and with all its parts in their context. (Stop Youth Addiction, Inc. v. Lucky Stores, Inc. (1998) 17 Cal.4th 553, 558.) However, the assumption of truth does not apply to contentions, deductions, or conclusions of law and fact. (Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125.)

We first review the complaint de novo to determine whether plaintiffs' complaint alleges facts sufficient to state a cause of action under any legal theory. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) When the demurrer is sustained without leave to amend, we must also decide whether the trial court abused its discretion. Abuse of discretion occurs when there is a reasonable possibility that the defect can be cured by amendment. (Blank v. Kirwan, supra, 39 Cal.3d at p. 318; Cooper v. Leslie Salt Co. (1969) 70 Cal.2d 627, 636.) "[W]here the nature of the plaintiff's claim is clear, and under substantive law no liability exists, a court should deny leave to amend because no amendment could change the result." (City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith (1998) 68 Cal.App.4th 445, 459-460.) The plaintiffs have the burden of proving that a particular amendment to the complaint would cure the defect. (Hendy v. Losse (1991) 54 Cal.3d 723, 742.)

B. The Demurrers

1. The trial court correctly sustained the demurrers to the causes of action alleged under section 2923.5.

In 2008, the Legislature enacted section 2923.5 in response to the massive amounts of foreclosures in California. (See Stats. 2008, c. 69 (S.B. 1137) § 1.) Section 2923.5 reads in pertinent part; "(a)(1) A mortgagee, trustee, beneficiary, or authorized agent may not file a notice of default pursuant to Section 2924 until 30 days after initial contact is made as required by paragraph (2) or 30 days after satisfying the due diligence requirements as described in subdivision (g). [¶] (2) A mortgagee, beneficiary, or authorized agent shall contact the borrower in person or by telephone in order to assess the borrower's financial situation and explore options for the borrower to avoid foreclosure. During the initial contact, the mortgagee, beneficiary, or authorized agent shall advise the borrower that he or she has the right to request a subsequent meeting and, if requested, the mortgagee, beneficiary, or authorized agent shall schedule the meeting to occur within 14 days. The assessment of the borrower's financial situation and discussion of options may occur during the first contact, or at the subsequent meeting scheduled for that purpose. In either case, the borrower shall be provided the toll-free telephone number made available by the United States Department of Housing and Urban Development (HUD) to find a HUD-certified housing counseling agency. Any meeting may occur telephonically." (§2923.5, subds. (a)(1) and (2), emphasis added.)

Section 2923.5 only applies to owner occupied residences secured by mortgages from January 1, 2003, to December 31, 2007. (§ 2923.5, subd. (i).) The purpose of this statute" is to create a new, even if limited right, to be contacted about the possibility of alternatives to full payment of arrearages." (Marby v. Superior Court (2010) 185 Cal.App.4th 208, 225.) However, section 2923.5 was "carefully drafted to avoid bumping into federal law" regulating loan services. (Marby v. Superior Court, supra, 185 Cal.App.4th at p. 226.) As a result, the sole remedy available under section 2923.5 is "more time" before a foreclosure occurs. (Id. at p. 226.) Once foreclosure occurs, section 2923.5 does not provide any basis for relief, such as damages or an order setting aside the foreclosure. (Marby v. Superior Court, supra, 185 Cal.App.4th at pp. 235-236 [after foreclosure occurs, there is no basis for relief]; see also Ngoc Nguyen v. Wells Fargo Bank, N.A. (N.D. Cal. 2010) 749 F.Supp.2d 1022, 1033 [section 2923.5 does not provide a damages remedy for noncompliance after foreclosure].)

Similarly, in keeping with the intent to avoid conflict with federal loan servicing laws, the "assess" and "explore" requirements of section 2923.5 must be narrowly construed. (Marby v. Superior Court, supra, 185 Cal.App.4th at p. 232.) "[A]ny `assessment' [under section 2923.5] must be necessarily simply — something on the order of, `why can't you make your payments?'" (Ibid.) "Exploration must necessarily be limited to merely telling the borrower the traditional ways that foreclosure can be avoided . . . ." (Ibid.) Moreover, "[t]here is nothing in section 2923.5 that requires the lender to rewrite or modify the loan." (Marby v. Superior Court, supra, 185 Cal.App.4th at p. 214.)

The complaint contains three causes of action predicated on alleged violations of section 2923.5 Plaintiffs allege they all had home loans serviced by OneWest. Plaintiffs allege OneWest foreclosed or began foreclosure proceedings against all of them. However, as shown below, plaintiffs each admit key facts demonstrating defendant's compliance with section 2923.5.

Moreover, plaintiffs' did not satisfy their burden of proving that any amendment to the complaint would result in properly plead claims. Thus, the court did not abuse its discretion in sustaining the demurrer without leave to amend.

a. First Cause of Action, the Murrays

In the first cause of action, the Murrays allege OneWest foreclosed on their residence after a discussion about a modification. The complaint alleges OneWest discussed the prospect of a non-profit company assisting the Murrays with a loan modification. This discussion conformed with the requirements of section 2923.5. (Marby v. Superior Court, supra, 185 Cal.App.4th at p. 232.)

Even if the Murrays were able to state a violation of section 2923.5, no relief could be granted. This is because the only remedy for noncompliance under section 2923.5 is postponement of a foreclosure before it happens. (Marby v. Superior Court, supra, 185 Cal.App.4th at pp. 235-236; Ngoc Nguyen v. Wells Fargo Bank, N.A., supra, 749 F.Supp.2d at p. 1033.) Section 2923.5 does not provide any other relief for lack of compliance.

b. Second Cause of Action, the Moores

In the second cause of action, the Moores make specific allegations that they had conversations with OneWest representatives about financial status and a loan modification. The second amended complaint alleges, "After these communications occurred, Defendant [OneWest Bank] finally agreed it would not file a notice of default and election to sell under deed of trust . . . and they told the Moores that they qualified for a loan modification." The complaint alleges, after a short time, OneWest repudiated all prior promises concerning the loan modification. The complaint also alleges OneWest," refused to undergo any meetings under Section 2923.5."

We agree with OneWest that the second amended complaint shows it complied with its obligation under section 2923.5. OneWest had multiple conversations with the Moores assessing the Moore's financial situation and exploring a way to avoid foreclosure, namely a loan modification. Section 2923.5 does not in any way require a lender to give a borrower a loan modification. (Marby v Superior Court, supra, 185 Cal.App.4th at p. 231.) Thus, the alleged repudiation of the loan modification is of no importance in analyzing whether a section 2923.5 violation has been pled.

In addition, there are problems with the Moores' allegation that OneWest did not comply with the "meeting" provision of section 2923.5. First, the Moores do not allege a meeting was requested when they were initially contacted by a OneWest representative. Furthermore, subdivision (a)(2) of section 2923.5 allows "[a]ny meeting" to occur telephonically and, in this regard, the Moores indicate there was telephonic contact with OneWest personnel subsequent to the initial loan modification discussion.

c. Third Cause of Action, the Scotts

In the third cause of action, the Scotts allege that OneWest's predecessor, Indy Mac Bank, suggested a home loan modification in 2009. But, when OneWest began servicing the loan the Scotts were told "`there would be no more loan modification offers.'" The Scotts allege, OneWest then suggested they "could qualify for a loan modification if they became delinquent on a `few' payments." (emphasis added.)~ After they became delinquent, OneWest filed a notice of default and election to sell under deed of trust without complying with section 2923.5. These allegations demonstrate OneWest did not violate section 2923.5 because discussions assessing their loan were clearly had between OneWest and the Scotts. (Marby v. Superior Court, supra, 185 Cal.App.4th at p. 232.) Moreover, although the Scotts allege OneWest did not conduct the "required meetings," the allegation is inadequate because the Scotts do not allege a meeting was requested as is required by section 2923.5, subdivision (a)(2).

Finally, the Scott's complaint appears to suggest OneWest violated 2923.5 because it conducted the "assess" and" explore" conversation before and not after the Scotts defaulted on their loan. No language in the statute requires the initial contact to occur after default and we will not read that requirement into the statute. (Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 545.)

2. The trial court correctly sustained the demurrer to the fifth cause of action, breach of oral contract.

The fifth cause of action alleges OneWest breached an oral contract whereby Ms. Hampton-Stein would forego marketing her properties for refinancing in exchange for the lender's agreement to conduct detailed loan modification discussions. The discussions allegedly would comply with the requirements of section 2923.5 even though Indy Mac was not otherwise bound to comply with the statute. It was alleged that the oral contract was entered into between Ms. Hampton-Stein and OneWest's predecessor in interest, Indy Mac Bank.

Ms. Hampton-Stein alleges OneWest was assigned all the rights and obligations of the oral contract from its predecessor, Indy Mac Bank. OneWest allegedly ratified the oral agreement. She alleges OneWest breached the oral contract when it foreclosed upon Ms. Hampton-Stein's two properties.

Ms. Hampton-Stein alleges OneWest breached an oral agreement to comply with section 2923.5 before foreclosing. A cause of action for breach of contract requires a pleading of: (1) the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) resulting damage to the plaintiff. (Reichert v. General Ins. Co. (1968) 68 Cal.2d 822, 830; Smith v. Royal Mfg.Co. (1960) 185 Cal.App.2d 315, 325.) An oral contract is pleaded according to its legal effect. (4 Witkin, Cal. Procedure (5th ed. 2008) Pleading, §522, p. 652.) We conclude the trial court properly sustained the demurrer to this cause of action for several reasons.

Even if Ms. Hampton-Stein can bring OneWest under section 2923.5 through the alleged oral contract, she admits enough facts to show OneWest complied with the requirements. Ms. Hampton-Stein alleges multiple conversations with OneWest representatives discussing loan modifications after they began servicing the loans on both her properties and before the foreclosure sale.

Moreover, even if we remove the requirements of section 2923.5, OneWest satisfied the terms of the oral contract under general contract principles. A reading of all the complaints shows Ms. Hampton-Stein admits enough facts to show she received consultation before the foreclosure, thus satisfying the terms of the oral contract.

In the first amended complaint, Ms. Hampton-Stein alleges when OneWest was going to foreclose she "attempted to negotiate with [defendant]" which resulted in a delay of the foreclosure sale and "[defendant]" telling her "that they intended to now honor the prior commitments of [Indy Mac Bank] and complete financing on the two parcels of real estate." The second amended complaint ambiguously describes the same events: "After again being contacted by [Ms. Hampton-Stein], [OneWest] delayed the foreclosure proceeding and indicated a desire to comply with the agreements . . . ." The alleged conversation and negotiation between Ms. Hampton-Stein and OneWest infers consultation occurred concerning a loan modification. As Ms. Hampton-Stein seems to be suggesting in her reply brief, that is all the oral contract required. The alleged facts show OneWest satisfied the terms of the oral contract.

Furthermore, Ms. Hampton-Stein will not be able to amend the pleading around this admission. "An amendment that contradicts an admission in the original pleadings will ordinarily not be allowed. [Citation.]" (Astenius v. State of California (2005) 126 Cal.App.4th 472, 477.)

We also agree with OneWest that the oral contract is barred by the statute of frauds.4 (Secrest v. Security National Mortg. Loan Trust 2002-2 (2008) 167 Cal.App.4th 544, 552-553.) "An agreement to modify a contract that is subject to the statute of frauds is also subject to the statute of frauds. [Citations.]" (Id. at p. 553.) In the first amended complaint, Ms. Hampton-Stein characterized the oral agreement as a "loan modification and forbearance agreements . . . ." Her attempt to change the character of the agreement by amending the complaint to avoid the statute of frauds was not effective. (Astenius v. State of California, supra, 126 Cal.App.4th at p. 477.) Accordingly, the trial court correctly sustained the demurrer without leave to amend for the cause of action alleging breach of oral contract.

3. The complaint sufficiently alleges a claim for conversion.

In the fourth cause of action, Ms. Hampton-Stein alleges OneWest converted personal property from her Arizona home. "Conversion is generally described as the wrongful exercise of dominion over the personal property of another. [Citation.] The basic elements of the tort are (1) the plaintiff's ownership or right to possession of personal property; (2) the defendant's disposition of the property in a manner that is inconsistent with the plaintiff's property rights; and (3) resulting damages. [Citation.]" (Fremont Indem. Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119.) Conversion can be pled with general factual allegations. (Lowe v. Ozmun (1902) 137 Cal. 257, 260; Daggett v. Gray (1895) 110 Cal. 169, 171; Franklin v. Municipal Court (1972) 26 Cal.App.3d 884, 902.)

The fourth cause of action alleges sufficient facts to constitute conversion. Ms. Hampton-Stein alleges ownership of the audio/visual equipment. The complaint alleges OneWest was responsible for taking the equipment from her Arizona home. The equipment was taken while the home was still owned by Ms. Hampton-Stein. Finally, the complaint alleges $250,000 in damages as a result of the unlawful taking. The facts as alleged were sufficient to state a conversion cause of action.


The order sustaining the demurrer on the fourth cause of action (conversion) is reversed. In all other respects, the judgment is affirmed. Each side is to bear its own costs on appeal.

We concur:




* Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
1. Unless otherwise indicated, future statutory references are to the Civil Code.
2. Section 2923.5 requires a mortgage lender to contact a borrower in person or by telephone to assess the borrowers' financial situation and to explore options other than foreclosure prior to filing a default notice.
3. The case has a somewhat convoluted history. The action began as a purported class action by Ms. Hampton-Stein's fictitious business entity, Robany, Inc., against defendants Indy Mac Bank and Trustee Corps. OneWest, who is Indy Mac Bank's successor in interest, was named as a Doe defendant on May 28, 2009. OneWest subsequently demurred to the complaint. However, prior to hearing on the demurrer to the complaint, plaintiffs filed a first amended complaint against defendants Trustee Corp., IMB Holdco, LLC., and OneWest Bank. The first amended complaint added the individual plaintiffs to the action. The trial court subsequently sustained OneWest's demurrers to all causes of action with leave to amend.
4. OneWest raises the statute of frauds defense for the first time on appeal. "A general denial in an answer is sufficient to preserve a statute of frauds objection [citation], as is a general demurrer [citation]." (Secrest v. Security National Mortg. Loan Trust 2002-2, supra, 167 Cal.App.4th at p. 552.)


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