₦airaland Forum

Procedural Posture

Plaintiff appealed the decision of the Superior Court of Los Angeles County (California) affirming the trial court's judgment in favor of defendant on plaintiff's bad faith denial of contract cause of action.

Overview

Defendant retained a law firm to defend it in a lawsuit. Pursuant to a letter of understanding signed by defendant's general counsel and law firm, defendant was to pay for costs incurred on its behalf, including fees for accountants. Gov 1090 . Defendant hired a new general counsel, and he became dissatisfied with the law firm's effort. Law firm was discharged, and defendant asked law firm for a summary of the work performed by plaintiff accounting firm hired by law firm. Plaintiff accounting firm billed defendant, but no payment was forthcoming. Ultimately plaintiff accounting firm filed an action against defendant alleging breach of contract and bad faith denial of contract. The jury granted judgment for plaintiff accounting firm. The court of appeal concluded that a tort recovery was unavailable. On appeal, the court held that the legislature had not manifested an intent either to expand contract breach recovery or to provide tort damages for ordinary contract breach.

Outcome

The court affirmed the decision of the court of appeals affirming the judgment for defendant in plaintiff's bad faith denial of contract cause of action. The court held that tort recovery was unavailable for such a claim.

Procedural Posture

Two days before a scheduled foreclosure sale arising from a construction loan, plaintiff borrower sued defendants, an acquiring bank and a trustee, alleging claims for misrepresentation, breach of contract/promissory estoppel, negligence, violation of Bus. & Prof. Code, § 17200 et seq., declaratory relief, accounting, and reformation. The Marin County Superior Court (California) granted summary judgment for defendants. The borrower appealed.

Overview

The original lender of the loan had gone into receivership with the Federal Deposit Insurance Corporation, and the acquiring bank bought the lender's assets through a purchase and assumption agreement. The court held that judicial notice was not properly taken of the content of the purchase and assumption agreement. The court found that prolonged communication—perhaps more accurately, miscommunication—about a possible loan modification raised a triable issue of fact of intent by the acquiring bank to profit by misleading the borrower about his loan modification prospects, making summary judgment improper as to the misrepresentation claim. There was also a triable issue of material fact as to a duty of care to the borrower, which potentially made the acquiring bank liable for its own negligence. Because statements by a representative of the acquiring bank could be construed as misstatements of fact, with possible liability for such conduct left to the trier of fact, a triable issue was raised as to the Bus. & Prof. Code, § 17200 et seq., claim. Because the borrower had a fully matured cause of action for money, he had to seek damages, and not pursue a declaratory relief claim.

Outcome

The court affirmed the summary judgment for the trustee. The court also affirmed the summary judgment for the acquiring bank on the causes of action for declaratory relief and accounting, but reversed the summary judgment as to the remaining causes of action against the acquiring bank.