Case Name: Angie & Richard Ceraolo v. Specialized Loan Servicing, LLC; Wilmington Trust, N.A.
Case No.:? 16CV293585
This is an action by Plaintiffs Angie and Richard Ceraolo (?Plaintiffs?) alleging violations of the Homeowners Bill of Rights (?HBOR?) and Unfair Business Practices.? Currently before the Court is the demurrer by Defendants Specialized Loan Servicing, LLC and Wilmington Trust, N.A. (?Defendants?) to Plaintiffs? original Complaint.? Also before the Court (Line 7) is Plaintiffs? Order to Show Cause/Motion for Preliminary Injunction.
Defendants? demurrer is sustained in part, and overruled in part, as set forth below.
A Preliminary Injunction is DENIED, as the Court finds based upon the evidence presented that Plaintiffs have not demonstrated a reasonable probability of prevailing on the merits of their claims. The Temporary Restraining Order is dissolved with this order denying the preliminary injunction. This ruling is without prejudice to Plaintiffs continuing to seek injunctive relief, if any, in their Complaint or subsequent amended complaint(s).
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.?])
Requests for Judicial Notice
Defendants? request for judicial notice of four documents (exhibits 1-4 to the declaration of Defense Counsel Robert McWhorter) is GRANTED in part and DENIED in part.? A precondition to judicial notice in either its permissive or mandatory form is that the matter to be noticed be relevant to the material issue before the Court.? (Silverado Modjeska Recreation and Park Dist. v. County of Orange (2011) 197 Cal.App.4th 282, 307, citing People v. Shamrock Foods Co. (2000) 24 Cal 4th 415, 422 fn. 2.)
Defendants? request for judicial notice of a copy of the Deed of Trust securing the mortgage loan for the subject property, recorded May 4, 2006 (Ex. 1), and a copy of a Notice of Default on that loan, recorded March 14, 2016 (Ex. 2) 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.])? The request for judicial notice of a copy of a print out of the results of an internet search for recorded documents (Ex. 3) is DENIED.? This document is not relevant to any material issue before the Court and is not a proper subject of judicial notice under Evid. Code ??452(c), (d) or (h).? (See Searles Valley Minerals Operations, Inc. v. State Bd. of Equalization (2008) 160 Cal.App.4th 514, 519 [refusing to take notice of web site pages of the American Coal Foundation and the U.S. Dept. of Energy]; Duronslet v. Kamps (2012) 203 Cal.App.4th 717, 737 [refusing to take judicial notice of information on the Cal. Bd. of Registered Nursing web site].)? Defendants? request for judicial notice of a copy of the Sixth District Court of Appeal?s unpublished decision in Ceraolo v. Citibank, N.A. (Sept. 19, 2014, 2014 WL 4667211) (Ex. 4) is GRANTED pursuant to Evid. Code ?452(d).? While not citable in support of legal arguments, as a court order the unpublished decision may still be noticed as to its contents and the legal effect of its rulings.? That decision, affirming a summary judgment granted to the defendants by this Court (Hon. Pierce) on February 27, 2013 in case no. 2011-1-CV-209557, states in pertinent part (at *1) that ?[t]he essential underlying facts are undisputed.? In December 2008 plaintiffs began discussing the prospect of a loan modification with BAC, servicer on their $3 million mortgage loan, and BAC?s successor by merger, Bank of America, N.A.? According to plaintiffs? first amended complaint, BAC told them that they could not be considered for a loan modification until they had missed two payments on the mortgage.? Plaintiffs then skipped two payments in early 2009 and applied for a loan modification.? That application was denied . . .? Plaintiffs? second modification application in January 2010 was also denied.?
The Court on its own motion pursuant to Evid. Code ?452(d) takes judicial notice of Plaintiffs? verified first amended complaint in case no. 2011-1-CV-209557, filed Feb. 1, 2012, in which they alleged (at 21-27) that they had submitted two loan modification applications, both of which had been denied by January 2010.
These prior loan modification applications are not disclosed in either the Complaint or the opposition to the demurrer despite the fact that Plaintiffs? Counsel, the Mellen Law Firm, also represented them in case no. 2011-1-CV-209557 from December 2011 forward, drafted their verified first amended complaint in that action, and represented them on appeal.
Plaintiffs? request for judicial notice of two documents; 1) another copy of the Notice of Default recorded March 14, 2016 (Ex. A to the request), and; 2) a copy of a Notice of Trustee?s Sale for the subject property recorded June 29, 2016, after Defendants? demurrer was filed (Ex. B), is GRANTED as to both documents pursuant to Evid. Code ?452(c).
Demurrer to Complaint
Defendants? demurrer to the entire Complaint on uncertainty grounds is OVERRULED.? Uncertainty is a disfavored ground for demurrer and is typically sustained only where the pleading is so bad the responding party cannot reasonably respond.? (See Khoury v. Maly?s of Cal., Inc. (1993) 14 Cal.App.4th 612, 616 [?A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.?])? Here it is readily apparent from Defendants? more specific arguments that they understand what the Complaint at least attempts to allege and there is no true uncertainty.
Plaintiffs? first two causes of action allege violations of the Homeowners Bill of Rights.? ?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.)
While Plaintiffs plead the alleged violations of Civil Code ??2923.6 & 2923.7 as separate causes of action, the actual private right to assert a claim for a violation of those statutes is provided by Civil Code ?2924.12(b), and such a claim is only available after a trustee?s deed upon sale has been recorded.? The Complaint does not allege that this has occurred.? Accordingly, the only relief potentially available to Plaintiffs at present under the HBOR is an injunction, and they may not at this time seek economic damages under their statutory claims.? ?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).)
The fact that the Complaint appears to seek additional forms of relief is not itself a basis for a demurrer.? A motion to strike, not a demurrer, is the proper procedure for challenging a requested form of relief, as the relief requested is not an element of a cause of action.? Accordingly to the extent it appears Defendants are attempting to demurrer to Plaintiffs? claims on the basis that improper forms of relief are requested, that demurrer is OVERRULED.
Defendants? demurrer to Plaintiffs? first cause of action (violation of Civ. Code ?2923.6, alleged against both Defendants) on the ground that it fails to state sufficient facts is SUSTAINED with 10 days? leave to amend.
Plaintiffs allege that Defendants violated ??2923.6(c), (d) and (f)(1) in denying a loan modification application they allegedly completed ?on or about November 2 2015.?? (See Complaint at 30 and 33.)? However, 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.?
The judicially noticed material establishes that Plaintiffs previously applied for a loan modification on at least two occasions prior to January 1, 2013.? The Complaint does not acknowledge these prior applications and does not allege that any ?material change? in Plaintiffs? financial circumstances was documented and submitted to Defendants before the loan modification application at issue was made.? 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.? Unless Plaintiffs can amend to allege that documentation of a ?material change? in financial circumstances since their prior applications was submitted to Defendants before the 2015 application described in the Complaint was made, there is no basis for this cause of action.
Defendants? demurrer to Plaintiffs? second cause of action (violation of Civ. Code ?2923.7, alleged against Defendant Specialized Loan Servicing only) on the ground that it fails to state sufficient facts is SUSTAINED with 10 days? leave to amend.
Civ. Code ?2923.7(a) states that ?[u]pon request from a borrower who requests a foreclosure prevention alternative, the mortgage servicer shall promptly establish a single point of contact and provide to the borrower one or more direct means of communication with the single point of contact.?? Civil Code ?2923.7(e) states that ??single point of contact? means an individual or team of personnel each of whom has the ability and authority to perform the responsibilities described in subdivisions (b) to (d), inclusive.?
The sole factual basis for the claim as presently alleged is Defendants? purported failure to properly provide them a ?single point of contract? that could coordinate receipt of documents regarding Plaintiffs? 2015 loan modification application.? (See Complaint at 39-52.)? No failure to provide coordination for any other identified ?foreclosure prevention alternatives? is alleged.? Unless Plaintiffs can allege that documentation of a ?material change? in financial circumstances was submitted prior to the alleged loan modification application completed November 2, 2015, no violation of ?2923.7 can be predicated on an alleged failure to coordinate receipt of documentation for an loan modification application that Defendant Specialized had no obligation to evaluate under Civ. Code ?2923.6(g).
Defendants? demurrer to Plaintiffs? third cause of action (violation of Business and Professions Code ?17200 et seq.) on the ground that it is preempted by the National Bank Act, is OVERRULED.? Defendants? argument is not supported by any cited authority and is otherwise unpersuasive.? (See Tanburri v. Suntrust Mortg., Inc. (N.D.Cal. 2012) 875 F.Supp.2d 1009 [claims for unfair business practices and wrongful foreclosure under California law not preempted by National Banking Act or Home Owners? Loan Act]; McFarland v. JP Morgan Chase Bank (C.D.Cal., April 28, 2014, 2014 WL 1705968 [same].)
Defendants? demurrer to Plaintiff?s third cause of action on the ground that it fails to state sufficient facts is SUSTAINED with 10 days? leave to amend as the first and second causes of action (the only basis for the alleged ?unlawful? conduct, see Complaint at 55-56) presently fail to state sufficient facts.
Plaintiffs are reminded that when a demurrer is sustained with leave to amend, the leave must be construed as permission to the pleader to amend the causes of action to which the demurrer has been sustained, not add entirely new causes of action.? (Patrick v. Alacer Corp. (2008) 167 Cal.App.4th 995, 1015.)? To raise claims entirely unrelated to those originally alleged requires either a new lawsuit or a noticed motion for leave to amend.? Absent prior leave of court an amended complaint raising entirely new and different causes of action may be subject to a motion to strike.? (See Harris v. Wachovia Mortg., FSB (2010) 185 Cal.App.4th 1018, 1023 [?Following an order sustaining a demurrer or a motion for judgment on the pleadings with leave to amend, the plaintiff may amend his or her complaint only as authorized by the court’s order. The plaintiff may not amend the complaint to add a new cause of action without having obtained permission to do so, unless the new cause of action is within the scope of the order granting leave to amend.?])