Demurrer (Judge Theodore C. Zayner)


Case Name: Joan Perry v. Bank of America, N.A., et al.

Case No.:? 2015-1-CV-288529

This is a wrongful foreclosure action.? Currently before the Court is the demurrer by Defendants Bank of America, N.A., Nationstar Mortgage, LLC and U.S. Bank National Association (?Defendants?) to Plaintiff?s Second Amended Complaint (?SAC?).? The hearing on the demurrer to the SAC was continued by the Court from July 14, 2016 to August 11, 2016 due to Plaintiff?s failure to timely file an opposition to the demurrer, as the opposition was not filed until July 14 although it was served on Defendants prior to that (by regular mail in violation of CCP ?1005(c)).? Defendants filed a Reply on July 7, 2016.? As an initial matter the Court has only considered the opposition filed on July 14, 2016 as the filing of a ?supplemental opposition? was not authorized by the Court.? The purpose of the continuance was to allow the Court to exercise its discretion to consider Plaintiff?s late-filed July 14, 2016 opposition, not to allow any of the parties to file additional papers.

The Court in ruling on a demurrer treats it ?as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.?? (Piccinini v. Cal. Emergency Management Agency (2014) 226 Cal.App.4th 685, 688, citing Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)? ?A demurrer tests only the legal sufficiency of the pleading.? It admits the truth of all material factual allegations in the complaint; the question of plaintiff?s ability to prove these allegations, or the possible difficulty in making such proof does not concern the reviewing court.?? (Committee on Children?s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213-214.)? Allegations are not accepted as true on demurrer if they contradict or are inconsistent with facts judicially noticed.? ?While inconsistent theories of recovery are permitted, a pleader cannot blow hot and cold as to the facts positively stated.?? (Manti v. Gunari (1970) 5 Cal.App.3d 442, 449, internal citation omitted.? See also Witkin, California Evidence (4th Ed., 2000) 1 Judicial Notice ?3(3) [?It has long been established in California that allegations in a pleading contrary to judicially noticed facts will be ineffectual; i.e., judicial notice operates against the pleader.?])

Request for Judicial Notice

Defendants? request for judicial notice of three recorded documents: 1) A copy of the Deed of Trust for the subject property, recorded December 22, 2004 (Ex. A); 2) A copy of the Notice of Default and Election to Sell Under Deed of Trust recorded October 31, 2014 (ex. B), and; 3) A copy of the Notice of Trustee?s Sale recorded October 1, 2015 (Ex. C) is GRANTED pursuant to Evid. Code ?452(c).? (See Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 264-265 [stating that courts may take judicial notice of the dates, parties, and legally operative language of a series of recorded documents.])

Demurrer to SAC

The SAC states four causes of action: 1) Violation of Civ. Code ??2923.55 & 2923.6; 2) Negligence; 3) Fraud (against Defendant Bank of America and Does only), and 4) Violation of Bus. & Prof. Code ?17200 et seq.? Defendants demurrer to all four causes of action on the ground that they each fail to state sufficient facts.

 

Defendants? demurrer to the SAC?s first cause of action for violation of Civ. Code ??2923.55 & 2923.6 is SUSTAINED with 10 days? leave to amend.

 

?The Homeowner Bill of Rights (Civ. Code, ?? 2920.5, 2923.4?2923.7, 2924, 2924.9?2924.12, 2924.15, 2924.17?2924.20) (HBOR), effective January 1, 2013, was enacted ?to ensure that, as part of the nonjudicial foreclosure process, borrowers are considered for, and have a meaningful opportunity to obtain, available loss mitigation options, if any, offered by or through the borrower’s mortgage servicer, such as loan modifications or other alternatives to foreclosure.? (? 2923.4, subd. (a).)? (Valbuena v. Ocwen Loan Servicing, LLC (2015) 237 Cal.App.4th 1267, 1272.)

 

The SAC does not allege that any Trustee?s Deed Upon Sale has been recorded.? Accordingly, the only relief potentially available to Plaintiff at present under the HBOR is an injunction.? ?If a trustee?s deed upon sale has not been recorded, a borrower may bring an action for injunctive relief to enjoin a material violation of Section 2923.55, 2923.6, 2923.7, 2924.9, 2914.10, 2924.11, or 2924.17.?? (Civ. Code ?2924.12(a)(1).)

 

Plaintiff continues to fail to sufficiently allege violations of ??2923.6 & 2923.55.? As was the case with the first amended complaint, the SAC at 21-22 admits that Plaintiff was both evaluated for and offered a loan modification by Defendant Bank of America in September 2009.

 

Civ. Code ?2923.6(g) states ?In order to minimize the risk of borrowers submitting multiple applications for first lien loan modifications for the purpose of delay, the mortgage servicer shall not be obligated to evaluate applications from borrowers who have already been evaluated or afforded a fair opportunity to be evaluated for a first lien loan modification prior to January 1, 2013, or who have been evaluated or afforded a fair opportunity to be evaluated consistent with the requirements of this section, unless there has been a material change in the borrower?s financial circumstances since the date of the borrower?s previous application and that change is documented by the borrower and submitted to the mortgage servicer.?? Civ. Code ?2923.6(g) by its terms applies whenever prior applications for a loan modification have been evaluated and does not reset when a different entity becomes the loan servicer.

 

The SAC at 45 conspicuously avoids alleging that documentation of a purported ?material change? in Plaintiff?s financial situation occurring after the prior September 2009 loan modification offer, or after any denial of a subsequent application, was submitted to any loan servicer before any further loan modification application.? Unless and until such an allegation is made, no loan servicer was obligated to consider any subsequent requests for modification(s) pursuant to Civ. Code ?2923.6(g).

 

Defendants? demurrer to the SAC?s second cause of action for negligence is SUSTAINED with 10 days? leave to amend.

 

?In order to establish negligence, a plaintiff must demonstrate a duty on the part of defendant, breach of that duty, causation and damages.?? (Strong v. State of Cal. (2011) 201 Cal.App.4th 1439, 1449.)? Whether a duty of care exists is a question of law for the Court.? (Id.)? It is settled under California law that ?as a general rule, a financial institution owes no duty of care to a borrower when the institution?s role in the loan transaction does not exceed the scope of its conventional role as a mere lender of money.?? (Nymark v. Heart Fed. Savings & Loan Ass?n (1991) 231 Cal.App.3d 1089, 1096.? See also Ragland v. U.S. Bank National Assn. (2012) 209 Cal.App.4th 182, 207 [Bank advice directly related to loan modification is within the scope of conventional role as a lender, and does not support a lender duty in negligence or negligent infliction of emotional distress.])

 

As the prior order noted it is well settled that Defendants had no duty to offer Plaintiff a loan modification.? While there is presently a split of authority among California courts on the issue of the scope of any duty of care owed by lenders beyond this the Court finds most persuasive the conclusion reached in Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 67. ?[A] loan modification is the renegotiation of loan terms, which falls squarely within the scope of a lending institution?s conventional role as a lender of money.? A lender?s obligations to offer, consider, or approve loan modifications and to explore foreclosure alternatives are created solely by the loan documents, statutes, regulations, and relevant directives and announcements from the United States Department of the Treasury, Fannie Mae, and other governmental or quasi-governmental agencies.? The Biakanja factors do not support imposition of a common law duty to offer or approve a loan modification.? If the modification was necessary due to the borrower?s inability to repay the loan, the borrower?s harm, suffered from denial of a loan modification, would not be closely connected to the lender?s conduct.? If the lender did not place the borrower in a position creating a need for a loan modification, then no moral blame would be attached to the lender?s conduct.?

 

Here Defendants did not place Plaintiff in the position to need a loan modification as they had nothing to do with either of Plaintiff?s original loans (see SAC at 18-19) and the SAC admits (at 21) that the loan modification she applied for and was offered by Defendant Bank of America in September 2009 was needed not because of any actions or statements by Defendants but because in 2009 she ?began experiencing financial difficulties and fell behind [on] her payments.?

 

As stated in Lueras, a lender only owes ?a duty to a borrower to not make material misrepresentations about the status of an application for a loan modification or about the date, time or status of a foreclosure sale.?? (221 Cal.App.4th at 68.)? The second cause of action does not contain any such allegations and the allegations of ?delay tactics? do not support a negligence claim.? Furthermore unless and until Plaintiff can allege that she provided documentation of a material change in her financial circumstances after 2009 to Defendants before making additional requests for loan modifications, she cannot establish that Defendants had any duty to consider subsequent modification applications pursuant to Civ. Code ?2923.6(g) and cannot show that any action or inaction by Defendants caused any damages she allegedly suffered.

 

Defendants? demurrer to the third cause of action for fraud on the ground that it fails to state sufficient facts is SUSTAINED without further leave to amend.

 

?The elements of fraud are (1) the defendant made a false representation as to a past or existing material fact; (2) the defendant knew the representation was false at the time it was made; (3) in making the representation, the defendant intended to deceive the plaintiff; (4) the plaintiff justifiably relied on the representation; and (5) the plaintiff suffered resulting damages.?? (West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 792 [citation omitted].)? ?Fraud must be pleaded with specificity rather than with general and conclusory allegations.? The specificity requirement means a plaintiff must allege facts showing how, when, where, to whom, and by what means the representations were made, and, in the case of a corporate defendant, the plaintiff must allege the names of the persons who made the representations, their authority to speak on behalf of the corporation, to whom they spoke, what they said or wrote, and when the representation was made.?? (Id. at 793 [citation and quotation marks omitted].)? Courts enforce the specificity requirement in consideration of its two purposes.? (Id. at 793.)? The first purpose is to give notice to the defendant with sufficiently definite charges that the defendant can meet them.? (Ibid.)? The second is to permit a court to weed out meritless fraud claims on the basis of the pleadings; thus, the pleading should be sufficient to enable the court to determine whether, on the facts pleaded, there is any foundation, prima facie at least, for the charge of fraud.? (Ibid.)

 

Despite begin advised in the prior order of the need to allege specific facts in order to sufficiently state a fraud claim, the SAC at 60-68 fails to describe how, when, where, to whom, and by what means the allegedly false representations were made in the manner necessary to sufficiently state a fraud claim.? Further leave to amend is DENIED as, despite direction from the Court that specific factual allegations were necessary, Plaintiff is either unable or unwilling to comply.? (See Medina v. Safe-Guard Products (2008) 164 Cal.App.4th 105, 112 fn. 8 [?As the Rutter practice guide states: ?It is not up to the judge to figure out how the complaint can be amended to state a cause of action. Rather, the burden is on the plaintiff to show in what manner he or she can amend the complaint, and how that amendment will change the legal effect of the pleading.??]? See also Drum v. San Fernando Valley Bar Ass?n. (2010) 182 Cal.App.4th 247, 253 [citing Medina].)

 

Defendants? demurrer to the fourth cause of action for Violation of Bus. & Prof. Code ?17200 et seq. is SUSTAINED with 10 days? leave to amend.? As the underlying causes of action on which this claim is based still fail to state sufficient facts, Plaintiff?s UCL claim does as well.