Gray v. Quicken Loans ( 2021 )

Filed 3/2/21
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SIX
WILLIAM GRAY, 2d Civ. No. B304532
(Super. Ct. No. 56-2019-
Plaintiff and Appellant, 00528118-CU-OR-VTA)
(Ventura County)
v.
QUICKEN LOANS, INC,
Defendant and Respondent.
Appellant William Gray’s home was destroyed by Ventura’s
Thomas Fire. Gray’s hazard insurance policy jointly paid him
and his mortgage lender, respondent Quicken Loans, Inc.
(Quicken), a total of $1,342,740. The Deed of Trust allowed
Quicken to hold the insurance proceeds in escrow and to disburse
the funds as repairs to the home were being made. Quicken
placed the funds in a non-interest bearing escrow account.
Gray filed this action against Quicken, on behalf of himself
and others similarly situated, alleging causes of action for breach
of fiduciary duty and violations of Civil Code section 2954.81 and
Business and Professions Code section 17200. He contends
All statutory references are to the Civil Code unless
1
otherwise stated.
section 2954.8 requires a lender to pay interest on insurance
proceeds held in escrow following the partial or total destruction
of the insured’s residence or other structure.
The trial court sustained Quicken’s demurrer to the
complaint without leave to amend. We affirm. Neither section
2954.8 nor the parties’ loan agreement required the payment of
interest.
DISCUSSION
Standard of Review
We review an order sustaining a demurrer without leave to
amend de novo, exercising our independent judgment as to
whether a cause of action has been stated as a matter of law
under any legal theory. (Villafana v. County of San Diego (2020)
57 Cal.App.5th 1012, 1016; McKell v. Washington Mutual, Inc.
(2006) 142 Cal.App.4th 1457, 1469.) We give the complaint a
reasonable interpretation, considering all material facts that are
properly pleaded and matters that may be judicially noticed, but
not contentions, deductions or conclusions of fact or law. (Blank
v. Kirwan (1985) 39 Cal.3d 311, 318; Yvanova v. New Century
Mortgage Corp. (2016) 62 Cal.4th 919, 924.)
The Trial Court Properly Sustained Quicken’s
Demurrer Without Leave to Amend
Section 2954.8, subdivision (a) requires a lender “that
receives money in advance for payment of taxes and assessments
on the property, for insurance, or for other purposes relating to
the property” to pay two percent interest per annum on the
amount being held. (Italics added.) Gray contends hazard
insurance proceeds are subject to this section because they are
paid and received “in advance” of rebuilding.
The Deed of Trust requires Gray to maintain hazard
insurance on the property. Section 5 provides: “In the event of
loss, Borrower shall give prompt notice to the insurance carrier
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and Lender. Lender may make proof of loss if not made promptly
by Borrower. Unless Lender and Borrower otherwise agree in
writing, any insurance proceeds . . . shall be applied to
restoration or repair of the Property, if the restoration or repair is
economically feasible and Lender’s security is not lessened.
During such repair and restoration period, Lender shall have the
right to hold such insurance proceeds until Lender has had an
opportunity to inspect such Property to ensure the work has been
completed to Lender’s satisfaction, provided that such inspection
shall be undertaken promptly. Lender may disburse proceeds for
the repairs and restoration in a single payment or in a series of
progress payments as the work is completed. Unless an
agreement is made in writing or Applicable Law requires interest
to be paid on such insurance proceeds, Lender shall not be
required to pay Borrower any interest or earnings on such
proceeds.” (Italics added.)
Since there is no written agreement to pay interest in this
case, the question is whether the plain language of section 2954.8
constitutes “Applicable Law” requiring interest to be paid on the
insurance proceeds. This requires us to “look to the statute’s
words and give them their ‘usual and ordinary meaning.’
[Citation.] ‘The statute’s plain meaning controls the court’s
interpretation unless its words are ambiguous. If the plain
language of a statute is unambiguous, no court need, or should,
go beyond that pure expression of legislative intent.’ [Citation.]”
(White v. Ultramar, Inc. (1999) 21 Cal.4th 563, 572 (White);
County of Los Angeles v. Financial Casualty & Surety, Inc. (2013)
216 Cal.App.4th 1192, 1196.)
The parties cite no relevant California appellate authority,
but we find Lippitt v. Nationstar Mortgage, LLC (C.D.Cal. Apr.
16, 2020, No. SA CV 19-1115-DOC-DFM) 2020 U.S. Dist. Lexis
3
122881 (Lippitt) instructive.2 The district court determined,
under virtually identical facts,3 that section 2954.8 does not apply
to hazard insurance proceeds. The court explained: “Insurance
[p]roceeds are ‘received’ as compensation for property damage
that has already occurred, and the purposes for which the
[i]nsurance [p]roceeds ‘shall be applied’ depend on factors that
are not determined in ‘advance’ of the [i]nsurance [p]roceeds’
initial disbursement. . . . If the borrower chooses not to use the
[i]nsurance [p]roceeds to immediately pay down their loan, the
Deed of Trust permits the lender to hold insurance proceeds
received in arrears for restoration or repair if ‘restoration or
repair is economically feasible and Lender’s security is not
lessened.’” (Lippitt, at p. *20.) Reading the borrower’s Deed of
Trust in conjunction with section 2954.8’s “plain language,” the
court “conclude[d] that section 2954.8 does not apply to the
[i]nsurance [p]roceeds -- funds received in arrears for past losses
and then held for specified purposes -- because they are not
‘received . . . in advance[]’ for specified purposes.” (Lippitt, at
p. *20.)
Gray’s Deed of Trust tracks both section 2954.8 and the
Lippitt Deed of Trust. Section 3 states: “Borrower shall pay to
Lender on the day Periodic Payments are due under the Note,
. . . a sum (the ‘Funds’) to provide for payment of amounts due
for: (a) taxes and assessments and other items which can attain
2“Although not binding, unpublished federal district court
cases are citable as persuasive authority.” (Aleman v. Airtouch
Cellular (2012) 209 Cal.App.4th 556, 576, fn. 8; Olinick v. BMG
Entertainment (2006) 138 Cal.App.4th 1286, 1301, fn. 11.)
3 The Lippitt home was destroyed in 2018’s Woolsey fire.
(Lippitt, supra, 2020 U.S. Dist. Lexis 122881, *2.)
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priority over this Security Instrument as a lien or encumbrance
on the Property; (b) leasehold payments or ground rents on the
Property, if any; (c) premiums for any and all insurance required
by Lender under Section 5; and (d) Mortgage Insurance
Premiums, if any, or any sums payable to by Borrower to Lender
in lieu of the payment of Mortgage Insurance premiums in
accordance with the provisions of Section 10. These items are
called ‘Escrow Items.’”
Based upon the statutory and contractual language, we
agree with Lippitt that section 2954.8 “applies to common
escrows maintained to pay taxes, assessments, and insurance
premiums -- not to the comparatively unique example of hazard
insurance proceeds held by a lender pending property
rebuilding.” (Lippitt, supra, 2020 U.S. Dist. Lexis 122881, *21.)
Accordingly, the insurance proceeds held by Quicken
pursuant to section 5 of the Deed of Trust fall outside the scope of
section 2954.8. Gray’s secondary reliance on the purported
purposes of section 2954.8 does not and cannot circumvent the
statute’s plain language. (See Lippitt, supra, 2020 U.S. Dist.
Lexis 122881, *22; White, supra, 21 Cal.4th at p. 572.) We may
not construe a statute to include a presumed intention the
Legislature did not express.4 (Jackpot Harvesting Co., Inc. v.
Superior Court (2018) 26 Cal.App.5th 125, 142; California
Teachers Assn. v. Governing Bd. of Rialto Unified School Dist.
(1997) 14 Cal.4th 627, 632-633.)
4Given our determination that no section 2954.8 violation
occurred, we need not decide whether the statute creates a
private right of action or whether, by failing to pay interest on
the insurance proceeds, Quicken breached its fiduciary duties
and engaged in unfair competition.
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DISPOSITION
The judgment is affirmed. Quicken shall recover its costs
on appeal.
CERTIFIED FOR PUBLICATION.
PERREN, J.
We concur:
GILBERT, P. J.
TANGEMAN, J.
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Henry J. Walsh, Judge
Superior Court County of Ventura
______________________________
Bradley/Grombacher, Marcus J. Bradley, Kiley L.
Grombacher and Robert N. Fisher; Myers, Widders, Gibson,
Jones & Feingold, Erik B. Feingold, for Plaintiffs and Appellants.
Arnold & Porter Kaye Scholer, Douglas A. Winthrop, Amy
V. Endicott and Howard Cayne (pro hac vice application
pending), for Defendant and Respondent.
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