IKOLA, J.
Plaintiff Dave Barela applied with defendant Evelynn S. Townley for a joint modification from defendant Nationstar Mortgage, LLC (Nationstar) of the loan on Townley's home of over 25 years. In return, Barela expected a 50 percent equity interest in Townley's home. After Nationstar approved a loan modification for Townley, she informed Barela that two attorneys had advised her against the joint loan modification arrangement with Barela because it would constitute loan fraud and because she would be "crazy" to split her home's proceeds with him. Barela's lawsuit against Townley and Nationstar ensued.
On appeal Barela challenges the judgment after a bench trial. The judgment awarded Barela a net amount of $190 against Townley. The court found no prevailing party as between Barela and Townley. The court also rendered judgment in favor of Nationstar against Barela on all causes of action.
As to the judgment awarding Barela $190 against Townley, Barela argues: (1) no substantial evidence supports the court's finding that the agreement between Townley and Barela was unenforceable; (2) the court abused its discretion by finding Townley was entitled to a setoff of $5,000 for fees she paid Barela, who provided advice and drafted documents without a license to practice law; (3) the court abused its discretion by finding no prevailing party as between Barela and Townley; (4) the court abused its discretion by ruling that its factual findings on Barela's equitable claims against Townley made it unnecessary for a jury to determine Barela's legal claims against her; and (5) the court abused its discretion by failing to make findings on necessary elements of Barela's equitable claims against Townley, after Barela requested a statement of decision and then objected to the statement of decision.
As to the judgment in favor of Nationstar against Barela, Barela argues: (1) no substantial evidence supports the court's conclusions based on its recollection of witness testimony (expressed in its oral tentative decision); and (2) no substantial evidence supports the court's findings (a) Nationstar did not represent to Barela that he would be a co-borrower on Townley's modified loan, and (b) in any case, Barela was not justified in relying on any such representation.
Prior to 2004, Barela was a practicing attorney; he had practiced law for about 20 years. From 2011 to 2013, Barela worked for attorneys at Legally Yours on wrongful foreclosure cases. From 2010 or 2011 to 2015, Barela and his business partner Jimmy Lee acquired and collected on debt.
In October 2011, Lee asked Barela to talk with Townley, a widow whose home was in foreclosure. Townley told Barela she was going to lose her home in two days. Barela told Townley he had resigned from the law "due to trust account issues." He said that one of her options to stop the foreclosure of her home was to sue Lehman Brothers and the loan servicer. Townley paid Barela $5,000 in exchange for his drafting, among other things, a complaint (which Townley signed and filed in propria persona) and a temporary restraining order. Townley ultimately dismissed her lawsuit.
Barela tried to "get her a loan . . . to pay the arrearages." As a business proposition, Barela then suggested a short sale arrangement, whereby (1) he would buy Townley's home and deed the property back to her after the short sale, (2) he would live in the property and make the loan payments, (3) Townley would move out, and (4) at some agreed time they would sell the home and "split the equity 50/50." Nationstar, the loan servicer, would not have approved the short sale deal because it violated Nationstar's conditions for an arm's length transaction.
According to Barela, before completing the short sale, Townley suggested they apply for a loan modification instead; consequently, he and Townley entered into an oral agreement to do so. Under the agreement, he and Townley would apply as coborrowers under the Home Affordable Mortgage Assistance Program (HAMP) for a loan modification. If the application were approved, Townley would move out of her house and Barela and his family would move in. Barela would pay the loan modification payments, taxes, and any related expenses. After two years, "if the market was ripe," Barela and Townley would "sell the home and split the equity."
Barela wanted to be named a coborrower on the loan modification agreement so he could take an interest deduction for tax purposes, and because, otherwise, Townley could "back out of [their] agreement." Barela phoned Nationstar to ask whether he could be a coborrower on the loan modification application; he spoke with Douglas Hall. During that conversation, Barela stated he was Townley's boyfriend and lived at her property. According to Barela, he asked Hall whether he (Barela) "would be put on the loan modification agreement if it was approved" and Hall replied, "Yes."
Barela and Townley submitted a loan modification application to Nationstar. On the application, Barela specified Townley's address as his "mailing address" and Townley's home telephone number as his own. Barela also specified Townley's address as his own address on supporting documents. To enable Barela to talk with Nationstar about the proposed loan modification, Townley signed an authorization for Barela to act as her personal representative. In it, she listed her property address, her home telephone number, and Barela's cell phone number as Barela's contact information.
Fay Janati, Nationstar's mitigation resolution analyst, testified that Barela never told Nationstar that his principal residence was not at Townley's residence. Nationstar was never told about the oral agreement between Barela and Townley. If Nationstar had known about the oral agreement, Barela's actual residence, or that he was not Townley's boyfriend, Nationstar would not have approved the loan modification. Nationstar never adds coborrowers onto existing loans it modifies; in other words, a coborrower on a modified loan must have been a coborrower at the time of the loan's origination. However, Nationstar will consider a coapplicant who was not a coborrower on the original loan as a "financial contributor," whose income may be used as "good faith" support for purposes of approving the loan modification application and helping the homeowner to stay in the home. To be considered as a contributor, a person must have a legitimate relationship to the homeowner (such as a parent, boyfriend, or child) and must be living at the property as their primary residence.
Based on Townley's and Barela's incomes, Nationstar approved the loan modification application for Townley, and sent her a trial payment plan. Townley faxed Barela a copy of Nationstar's letter to her. Barela was worried because his name was not on the letter. He e-mailed Nationstar twice to ask why his name was not on the trial plan and also to inquire whether his name would be on the "permanent" loan modification agreement and whether a new trust deed would be prepared in the name of "Evelynn S. Townley and Dave M. Barela, as Tenants in Common."
Barela made improvements to the property at a cost of around $5,200. Townley was aware of and consented to those improvements. Barela also re-enrolled his daughter and granddaughter at Oakridge School for the next year.
Townley made all three trial plan payments. Nationstar automatically issued the final permanent modification. In April 2013, Townley and Nationstar executed a "Home Affordable Modification Agreement." From late April through early June, Townley periodically falsely told Barela that she had not received the permanent modification papers.
In a May 2013 e-mail to Townley, Barela stated they needed to get together and go over her "upgrades and property list so [he could] prepare a written agreement between" them. In a June 19, 2013 e-mail to Barela, Townley informed him that, after receiving his e-mail "requesting to do a contract" between them, she had consulted two different attorneys, who both had advised her not to go forward with their joint loan modification arrangement because it would constitute loan fraud, and because she "would be crazy to split [her] house's proceeds 50/50 with" him. The attorneys also told Townley "that had the short sale gone through and [Barela had] deeded the house back to" her, this would have violated their agreement with the lender. Townley stated that, due to the dismissal of her lawsuit, she should have received a refund of the $5,000 retainer fee she paid Barela, and therefore she and Barela were now "even" since he paid money for improvements.
Townley told Barela that if Nationstar had put his name on the loan modification agreement she would have abided by that agreement, but because he did not qualify with Nationstar he had breached their agreement.
Barela's operative complaint against Townley and Nationstar alleged 22 causes of action.
Nationstar moved for the bifurcation of Barela's equitable claims from his legal claims, and for the equitable claims to be tried first. Barela opposed the motion. He stated he was "essentially in agreement with Nationstar that the trial should be bifurcated," but he disagreed on how the bifurcated trial should proceed. The court granted Nationstar's motion.
Barela's equitable claims were tried at a bench trial. His equitable claims included specific performance; reformation of contract; and promissory estoppel.
Barela and his retained expert, Alan Wallace, testified at the bench trial. Janati testified for Nationstar. Townley did not testify.
At the conclusion of the bench trial, the court gave an oral tentative decision ruling (1) in favor of Nationstar against Barela on all causes of action, and (2) in favor of Barela against Townley for $5,190, with Townley entitled to a setoff of $5,000. The court ruled that its factual findings in connection with the equitable claims completely disposed of the legal causes of action, such that no jury trial was necessary.
Barela requested a statement of decision. The court issued one. Barela objected to it. The court overruled Barela's objections.
In its written judgment, the court found in favor of Nationstar on all of Barela's causes of action against it and that Nationstar was the prevailing party as against Barela. As to Townley, the judgment stated Barela was entitled to a net judgment of $190 against Townley and that there was no prevailing party as between Barela and Townley.
Barela alleges he and Townley entered into an oral agreement (the Agreement) about a joint loan modification. He argues no substantial evidence supports the court's finding the Agreement was unenforceable. He further argues the court abused its discretion by finding Townley was entitled to a $5,000 setoff and that neither Barela nor Townley was a prevailing party.
The court found the Agreement was unenforceable, inter alia, because Barela violated the law governing mortgage foreclosure consultants. (Civ. Code, § 2945 et seq.)
Section 2945.1, subdivision (a) defines "[f]oreclosure consultant" to include "any person who makes any solicitation, representation, or offer to any owner to perform for compensation or who, for compensation, performs any service which the person in any manner represents will in any manner," inter alia, stop or postpone the foreclosure sale; obtain a forbearance from a beneficiary or mortgagee; obtain an extension of the period within which the owner may reinstate the obligation; assist the owner to obtain a loan; or save the owner's residence from foreclosure. (§ 2945.1, subds. (a)(1), (2), (4), (6), (8).) Section 2945.1 defines "service" to include "[c]ontacting creditors on behalf of an owner of a residence in foreclosure" (id., subd. (e)(3)), or "[g]iving any advice, explanation, or instruction to an owner of a residence in foreclosure which in any manner relates to the cure of a default in or the reinstatement of an obligation secured by a lien on the residence in foreclosure, . . . or the postponement or avoidance of a sale of a residence in foreclosure. . . ." (id., subd. (e)(7)). Under section 2945.3, subdivision (a), every contract must be in writing and "fully disclose the exact nature of the foreclosure consultant's services and the total amount and terms of compensation." Section 2945.4, subdivision (e) prohibits a foreclosure consultant from acquiring "any interest in a residence in foreclosure from an owner with whom the foreclosure consultant has contracted. Any interest acquired in violation of this subdivision shall be voidable. . . ." Section 2945.45, subdivisions (a)(1) and (a)(2) require a foreclosure consultant to register with the California Department of Justice and post a surety bond in the amount of $100,000.
Substantial evidence supports the court's findings that Barela violated the law by acting as a foreclosure consultant and that, consequently, the Agreement was unenforceable. Barela contacted Nationstar on Townley's behalf to obtain a loan modification. The Agreement was unwritten and contemplated Barela's obtaining an equity interest in Townley's home. Barela was not registered to act as a foreclosure consultant. An essential element of a contract is that it have a "lawful object." (§ 1550.)
But Barela argues the Agreement should be enforced on policy grounds, asserting that Townley is more morally culpable than him: "In Johnson v. Johnson (1987) 192 Cal.App.3d 551 . . ., the court cited Justice Peters['] ruling in Norwood v. Judd (1949) 93 Cal.App.2d 276, 288-289 . . ., wherein Justice Peters stated the rule on enforcement of illegal contracts in these terms: `The rule that the courts will not lend their aid to the enforcement of an illegal agreement or one against public policy is fundamentally sound. . . . But the courts should not . . . blindly extend the rule to every case where illegality appears somewhere in the transaction. . . . Where, by applying the rule, the public cannot be protected because the transaction has been completed, where no serious moral turpitude is involved, where the defendant is the one guilty of the greatest moral fault, and where to apply the rule will be to permit the defendant to be unjustly enriched at the expense of the plaintiff, the rule should not be applied."
Barela further argues: "No serious moral turpitude is involved on the part of plaintiff. Instead, the `one guilty of the greatest moral fault' clearly is Townley. Townley, herself, approached Barela about changing their agreement regarding a short sale, to an agreement regarding a loan modification, and then took advantage of it by obtaining a permanent loan modification that she could not obtain herself by using Barela's cooperation and income, and then leaving Barela high and dry. Finally, application of the . . . rule in this case would unjustly enrich Townley by allowing her to reap the full benefits of the loan modification, notwithstanding Barela's role in the transaction and his subsequent conduct."
Contrary to Barela's argument, his moral turpitude is serious and clearly greater than Townley's. He broke the foreclosure consultant law, and lied on the loan modification application. He sought to acquire a 50 percent interest in Townley's home in exchange for his coapplying for the loan modification and agreeing to move into her home with his family and "essentially just pay[] rent." Townley, although not blameless, would have been the victim of Barela's "unfair dealing" by an unregistered foeclosure consultant (see § 2945, subd. (a)) had she not consulted independent attorneys.
Finally, Barela argues that, even if the Agreement was unenforceable, he had a viable promissory estoppel claim against Townley because she promised to move out of her home and allow Barela to move in if he agreed to submit a loan modification application as a coborrower with her and if the application were approved. He argues he relied on her "promise by making substantial improvements to the property, and re-enrolling his daughter and granddaughter into Oarkridge Private School near the property."
"Because promissory estoppel is an equitable doctrine to allow enforcement of a promise that would otherwise be unenforceable, courts are given wide discretion in its application." (US Ecology, Inc. v. State of California (2005) 129 Cal.App.4th 887, 902.) Promissory estoppel claims are "basically the same as contract actions, but only missing the consideration element. . . ." (Id. at p. 903.) Whether Barela's promise to serve as a "co-borrrower" or "contributor" on the loan application was insufficient to constitute valid consideration, thereby invoking the promissory estoppel doctrine, is beside the point. The transaction was still illegal. Barela also failed to meet another requirement for promissory estoppel — i.e., that his reliance be reasonable (id. at p. 901) — since there was no guarantee the loan modification application would be approved. Furthermore, the court did award Barela restitution for his improvement costs. As to Oakridge school, the statement of decision states, "the evidence showed that he committed to send his daughters to private school before he and Townley made their agreement."
The statement of decision states: "Barela is entitled to restitution of the cost of improvements to the house which enriched Townley, valued at $5,190." "Townley is entitled to a setoff of $5,000 for fees she paid to Barela for providing advice and drafting documents without a license to practice law." "Barela not only drafted a complaint, but also moving papers for a [temporary restraining order] and other filings. These filings were bespoked and commissioned. Barela admitted that he interviewed Townley and applied analysis to determine what causes of action to bring and what arguments to make. This is the essence of the practice of law. Barela is a disbarred attorney and, under Business and Professions Code [section] 6126, may not practice law. Therefore, Barela is not entitled to keep his $5,000 retainer under any theory, including quantum meruit. Townley did not sue for affirmative relief, but asserted the right to setoff this amount from any liability. The court agrees that a setoff is proper."
Barela asserts Townley never properly requested a credit for $5,000. Not so. Townley's answer asserted the affirmative defense that Barela's "alleged money owed for substantial improvements is an off set for money owed to" Townley. (Code Civ. Proc., § 431.70 [allowing answer to complaint to assert cross-demand for money].)
Barela argues, as against Townley, he was the prevailing party as a matter of law under Code of Civil Procedure section 1032, subdivision (a)(4), "because he recovered a net monetary recovery of $190." But Code of Civil Procedure section 1032, subdivision (a)(4), provides that "[w]hen any party recovers other than monetary relief . . ., the `prevailing party' shall be as determined by the court. . . ." Townley prevailed on Barela's claims that sought to take an equity interest in her home.
As to the judgment in favor of Nationstar against Barela, Barela argues no substantial evidence supports the court's findings that (1) no one from Nationstar represented Barela would be on the modified loan, and (2) in any event, Barela's reliance was unjustified.
Barela argues that — contrary to the court's finding otherwise — substantial evidence showed Hall represented to Barela that he would be on the modified loan. The substantial evidence to which Barela refers is his own trial testimony about his telephone conversation with Hall and his e-mail to Hall summarizing what Barela "believe[d]" they said in that conversation.
The statement of decision states the following: No one at Nationstar represented that Barela would be on the modified loan. Barela's claims against Nationstar were based entirely on the December 6, 2012 conversation between Barela and Hall. The evidence did not show that Hall told Barela that Nationstar, if it approved the loan modification, would insist upon Barela's name being on the loan documents. Because HAMP did not allow Nationstar to add new borrowers to existing loans, only Townley could be a borrower on the modified loan. "While it is possible that Hall misstated the HAMP process to Barela, it is unlikely." "The insistent request by Barela that he wanted to be obligated to pay the loan was so odd that Hall likely would have noted it in his record of the conversation. There is no such notation."
Janati testified she reviewed a call log which captured all conversations between Nationstar and Barela, and found no entry which suggested anyone at Nationstar told Barela he would be a coborrower on the loan. She testified HAMP does not add new borrowers to existing loans and that loan modification applicants overwhelmingly do not want a coborrower or financial contributor to be liable on the loan.
Even if Barela's testimony had been uncontradicted, the court was entitled to disbelieve it. (Ortzman v. Van Der Waal (1952) 114 Cal.App.2d 167, 171.)
Barela contends Nationstar was required to reform the loan modification agreement because Hall allegedly made a misrepresentation to Barela, and because Hall and another Nationstar employee did not respond to Barela's e-mails, causing Barela's mistake (about which Nationstar knew or suspected). Because substantial evidence showed Nationstar made no misrepresentation to Barela, and because Barela's e-mail message to Hall merely asserted that Hall had said that, if Barela were allowed "to be a co-borrower" on the application (italics added), he would have to "be on the permanent loan modification agreement." The court properly denied his reformation claim.
Barela challenges some findings allegedly communicated by the court in its oral tentative decision. But Barela objected to alleged omissions and ambiguities in the statement of decision; consequently, we may not infer that the trial court found in favor of the prevailing party as to those facts or on that issue. (Code Civ. Proc., § 634.) Nonetheless, Barela argues, "As previously noted, the Court's Statement of Decision is governing, however, the trial court's Tentative Decision gives insight as to the court's reasoning as subsequently stated in the Statement of Decision." Nowhere in Barela's opening brief, however, does he cite any legal authority for this "insight into reasoning" argument.
Barela contends the court abused its discretion by (1) ruling that its factual findings on Barela's equitable claims obviated the need for a jury trial on his legal claims, and (2) by failing to make findings on necessary elements of his equitable claims in its statement of decision.
Barela sought both equitable and legal relief based upon Townley's and Nationstar's alleged misconduct.
"It is well established that, in a case involving both legal and equitable issues, the trial court may proceed to try the equitable issues first, without a jury . . ., and that if the court's determination of those issues is also dispositive of the legal issues, nothing further remains to be tried by a jury." (Raedeke v. Gibraltar Sav. & Loan Assn. (1974) 10 Cal.3d 665, 671.) "California's preference for the trial of equitable issues before legal issues has produced a number of cases in which bench resolution of equitable issues preceded consideration of legal claims, and curtailed or foreclosed legal issues." (Hoopes v. Dolan (2008) 168 Cal.App.4th 146, 157.) "[T]here are solid policy reasons for giving one fact finder's determinations binding effect in a mixed trial of legal and equitable issues. The rule minimizes inconsistencies, and avoids giving one side two bites of the apple. [Citation.] The rule also prevents duplication of effort." (Id. at p. 158.)
As to Townley, Barela asserts "the following evidence at trial validated [his] right to proceed" with his legal claims because the evidence "reflect[s] upon Townley's credibility and could have been used by Barela to impeach" her during a jury trial. First, Townley concealed from Barela her receipt of the loan modification agreement from Nationstar, while simultaneously "sending Barela e-mails causing him to believe that she was going to abide by their agreement and let him move into" her home. Second, in Townley's June 19, 2013 e-mail to Barela, she admitted "the existence of their agreement regarding the loan modification," yet, in her verified answer to Barela's operative complaint, Townley "denie[d] all such allegations." Barela has waived his contention by failing to brief the elements of his legal causes of action and how they were not resolved by the court's determination of the equitable issues. (Cal. Rules of Court, rule 8.204(a)(1)(B).)
As to Nationstar, Barela asserts the "following evidence at trial validated [his] right to proceed with his legal claims" for intentional misrepresentation, negligent misrepresentation, and unfair business practices. (Bus. & Prof. Code, § 17200.) "Hall made a material misrepresentation to Barela that Nationstar would require him to be placed on the loan modification agreement. The misrepresentation, whether intentional or negligent, was material; Barela relied on the misrepresentation by agreeing to submit the application for a loan modification as a coborrower with Townley; Barela's reliance was reasonable; and Barela was damaged." The statement of decision, however, states the evidence did not show Hall made the claimed misrepresentation. As to Barela's unfair business practices claim, he has waived his contention by failing to brief the elements of the cause of action and how they were not resolved by the court's determination of the equitable issues. (Cal. Rules of Court, rule 8.204(a)(1)(B).)
Barela contends the statement of decision omits critical findings and does not adequately explain the factual and legal basis for the court's decision. He points out that he identified 48 controverted issues in his request for a statement of decision and that he filed objections to the court's statement of decision.
But the court was "not required to respond point by point to the issues posed in a request for statement of decision. The court's statement of decision is sufficient if it fairly discloses the court's determination as to the ultimate facts and material issues in the case." (Golden Eagle Ins. Co. v. Foremost Ins. Co. (1993) 20 Cal.App.4th 1372, 1380.) Furthermore, Barela has waived his contention by failing adequately to brief what ultimate facts or explanation was omitted. (Cal. Rules of Court, rule 8.204(a)(1)(B).)
Townley requests sanctions of at least $23,000 for a frivolous appeal. Her motion is denied. While the appeal is meritless, it is not frivolous. Moreover, Townley is not entirely blameless.
The judgment is affirmed. Nationstar and Townley shall recover their costs on appeal.
ARONSON, ACTING P. J. and FYBEL, J., concurs.
