Casimira T. Lumidao

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MEMORANDUM DECISION RE OBJECTION
TO CLAIM OF ONEWEST BANK, FSB
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UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
In re
CASIMIRA T. LUMIDAO,
Debtor.
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Case No. 09-32762 SFC
Chapter 13
MEMORANDUM DECISION RE OBJECTION TO CLAIM OF ONEWEST BANK, FSB
The court held a trial on March 9, 2010 regarding Debtor’s
objection to the secured claim of OneWest Bank, FSB (OneWest).
Bert M. Vega appeared for Debtor. 	Kelly M. Raftery appeared for
OneWest. 	Upon due consideration, and for the reasons stated below,
I determine that the objection to claim should be overruled.
In 2005, Debtor obtained a 30-year loan in the amount of
$677,000 secured by her residence. 	The promissory note (the Note)
provides for both an adjustable rate of interest and negative
amortization for a limited period of time. 	The Note provides for
an initial required monthly payment of $2,485. 	The Note clearly
states that this payment may be less than the interest accruing on
the loan, and that the principal balance may therefore increase.
Signed and Filed: March 09, 2010
________________________________________
THOMAS E. CARLSON
U.S. Bankruptcy Judge
________________________________________
Entered on Docket
March 10, 2010
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 09-32762 Doc# 39 Filed: 03/09/10 Entered: 03/10/10 10:00:58 Page 1 of 3

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MEMORANDUM DECISION RE OBJECTION
TO CLAIM OF ONEWEST BANK, FSB
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The Note also clearly states that once the principal balance
reaches 110 percent of the initial principal balance, the required
monthly payments will increase to an amount sufficient to amortize
the full principal balance over the remaining term of the loan.
When Debtor hit the 110 percent limit, OneWest notified her that
the required monthly payment increased to $4,554.
Debtor, who is not financially sophisticated, testified that
she did not fully understand the negative-amortization and percent-
of-principal-limit features of the Note, and thought that her
payments would not increase until January 2011. 	She seeks to have
this court determine that the Note is an adhesion contract that
should be construed to conform to her expectation that her payments
would not increase until 2011.
The following principles govern the enforcement of contracts
of adhesion under California law. 	(1) A contract of adhesion is a
standard-form contract drafted and imposed by the party of superior
bargaining power on a take-it-or-leave-it basis. 	(2) Courts will
review an adhesion contract carefully, and will decline to enforce
that contract if it either: (a) leads to an unconscionable result;
or (2) if the terms fall outside the reasonable expectations of the
weaker party. 	Contractual terms do not fall outside the reasonable
expectations of weaker party simply because that party did not
understand them fully; the weaker party must show that she would
not have made the contract had she understood its terms. 	1 Witkin,
Summary of California Law, Contracts §§ 323-325 (10th ed. 2005)
I find that the Note is an adhesion contract. 	I also find
that the terms of the Note are not substantively unconscionable.
Limiting the amount by which negative amortization increases the
Case: 09-32762 Doc# 39 Filed: 03/09/10 Entered: 03/10/10 10:00:58 Page 2 of 3

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MEMORANDUM DECISION RE OBJECTION
TO CLAIM OF ONEWEST BANK, FSB
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balance due is not unreasonable. 	Moreover, this is not a situation
in which Debtor was induced to refinance on risky terms a home that
she had owned for many years and in which she had substantial
equity. 	Debtor purchased the house only two years before obtaining
this loan, and introduced no evidence that she ever had any
significant equity in the house. 	Finally, I find that Debtor
failed to show that she would not have entered into the contract
had she understood its terms. 	Debtor did not testify that she
would not have obtained the loan if she had understood the percent-
of-principal limit and known that she would have to make full-
amortization payments before 2011. 	Debtor’s argument is that the
contract should be construed against OneWest simply because Debtor
did not understand it. 	This is not sufficient, where the loan
terms are set forth in language that is plain and unambiguous,
where those terms do not work a forfeiture, and where Debtor did
not testify that she would not have obtained the loan had she
understood its terms.
**END OF MEMORANDUM DECISION**
Case: 09-32762 Doc# 39 Filed: 03/09/10 Entered: 03/10/10 10:00:58 Page 3 of 3