Case Number: KC070387    Hearing Date: June 10, 2020    Dept: O

Defendant Trinity Financial Services LLC’s motion for judgment on the pleadings is GRANTED.  The Court will hear from Plaintiff regarding any grounds warranting leave to amend.

JUDICIAL NOTICE is taken of Defendant Trinity Financial Services, LLC’s (“Defendant”) Exhibits 1-10.  (Evid. Code § 451, 452.)

A motion for judgment on the pleadings has the same function as a general demurrer but is made after the time for demurrer has expired.  (CCP § 438.)  Except as provided by statute, the rules governing demurrers apply. (Cloud v. Northrop Grumman Corp. (1998) 67 Cal.App.4th 995, 999.)

A demurrer for sufficiency tests whether the complaint states a cause of action.  (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.)  When considering demurrers, courts read the allegations liberally and in context.  (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal.App.4th 1216, 1228.)  In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice.  (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.)  “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.”  (SKF Farms v. Superior Court (1984) 153 Cal.App.3d 902, 905.)  “The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.”  (Hahn, supra, 147 Cal.App.4th at 747.)

Defendant contends that Plaintiff Lidia Paredes (“Plaintiff”) has not stated a claim in any cause of action alleged in the Complaint.

All Causes of Action

Plaintiff’s entire complaint is premised on the assertion that the assignments are void, and that Defendant does not have authority to commence foreclosure proceedings.

However, the documents referenced in Plaintiff’s Complaint establishes Defendant’s authority.  (Complaint, Exhibit (“Ex.”) A.)  Under the Deed of Trust, MERS is identified as “a separate corporation that is acting solely as a nominee for lender and Lender’s successors and assigns.  MERS is the beneficiary under this Security Instrument.”  (Id.)  As MERS is the beneficiary under the Deed of Trust, it was authorized to assign its interests under the instruments as it so chose.  Thus, the assignments were valid.

Plaintiff has not alleged any prejudice from any alleged irregularity in the process.  Demurrer is SUSTAINED.

Violation of Civ. Code § 2924(a)(1) (1st Cause of Action)

This cause of action fails because Plaintiff has not stated facts in the pleading that show any failure to comply with the requirements of Civil Code section 2924.  Plaintiff has alleged in the Complaint that a notice of default was filed and recorded on August 23, 2017.  (Complaint, ¶ 14; RJN, Ex. 5.)  Simultaneously, Defendant Special Default Services, Inc. was substituted as trustee.  (RJN, Ex. 4.)  Thus, from the face of the complaint, Plaintiff admits that Defendant complied with the notice requirement of Civil Code section 2924(a)(1).

Thus, demurrer is SUSTAINED.

Wrongful Foreclosure (2th Cause of Action)

To state a claim for wrongful foreclosure, Plaintiff must allege (1) the trustee or mortgagee caused an illegal, fraudulent, or willfully oppressive sale of real property pursuant to a power of sale in a mortgage or deed of trust; (2) the party attacking the sale (usually but not always the trustor or mortgagor) was prejudiced or harmed; and (3) in cases where the trustor or mortgagor challenges the sale, the trustor or mortgagor tendered the amount of the secured indebtedness or was excused from tendering.  (Lona v. Citibank, N.A. (2011) 202 Cal. App. 4th 89, 104, 134.)

This cause of action is contingent upon the first, third, fourth, and fifth causes of action.  (Complaint, ¶¶ 34-39.)  As discussed above, however, Plaintiff has failed to allege facts to constitute a cause of action showing any irregularity in the foreclosure sale.

Thus, demurrer to this cause of action is SUSTAINED.

Violation of Civ. Code 2923.5 (3rd Cause of Action)

Under Civil Code section 2923.5(a)(1):

A mortgage servicer, mortagee, trustee, beneficiary, or authorized agent shall not record a notice of default pursuant to Section 2924 until both of the following:  (A) either 30 days after initial contact is made as required by paragraph (2) or 30 days after satisfying the due diligence requirements as described in subdivision (e); and (B) the Mortgage servicer complies with paragraph (1) of subdivision (a) of Section 2924.18, if the borrower has provided a complete application as defined in subdivision (d) of Section 2924.18.

(Civ. Code § 2923.5, subd. (a)(1).)

Under Civil Code section 2923.5(a)(2):

A mortgage servicer shall contact the borrower in person or by telephone in order to assess the borrower’s financial situation and explore options of the borrower to avoid foreclosure.  During the initial contact, the mortgage servicer shall advise the borrower that he or she has the right to request a subsequent meeting and, if requested, the mortgage servicer shall schedule the meeting to occur within 14 days.  The assessment of the borrower’s financial situation and discussion of options may occur during the first contact, or at the subsequent meeting scheduled for that purpose.  In either case, the borrower shall be provided the toll-free telephone number made available by the United States Department of Housing and Urban Development (HUD) to find a HUD-certified housing counseling agency.  Any meeting may occur telephonically.

(Civ. Code § 2923.5, subd. (a)(2).)

A notice of default recorded pursuant to Section 2924 shall include a declaration that the mortgage servicer has contacted the borrower, has tried with due diligence to contact the borrower as required by this section, or that no contact was required because the individual, did not meet the definition of “borrower” pursuant to subdivision (c) of Section 2920.5 (Civ. Code § 2923.5., subd. (b).)

Here, judicial notice is taken of Defendant’s Exhibit 5, which contains a conforming declaration of compliance.  Furthermore, Plaintiff’s own Exhibit B in her Complaint contains such a declaration of diligence.

Thus, demurer to this cause of action is SUSTAINED.

Violation of Civ. Code § 2924.11 (4th Cause of Action)

If a foreclosure prevention alternative is approved in writing after the recordation of a notice of default, a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of sale or conduct a trustee’s sale.  (Civ. Code § 2924.11(b).)  An assertion that a defendant violated a statute must alleged facts supporting the statutory elements of the violation with “reasonable particularity.”  (Perdue v. Crocker National Bank (1985) 38 Cal.3d 913, 929.)

Plaintiff alleges that she submitted a complete loan modification application to Defendant on December 18, 2017.  (Complaint, ¶ 51.)  Plaintiff then alleges that Defendant continued to proceed with the recording of a Trustee’s Deed Upon Sale despite having her application for loan modification in active review.  (Id. at ¶ 53.)

However, Plaintiff fails to allege that Defendant approved a foreclosure prevention alternative in writing.  The only fact that Plaintiff alleges in her Complaint is there is no determination on Plaintiff’s loan modification because there was no denial letter provided to Plaintiff.  (Id. at ¶ 54.)

Thus, demurer to this cause of action is SUSTAINED.

Violation of Civ. Code § 2923.7 (5th Cause of Action)

Upon 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.  (Civ. Code § 2923.7(a).)

This allegation is uncertain because Plaintiff does not allege whether one was eventually appointed but Plaintiff felt that this timeframe was unreasonable, or if none were assigned at the time the Complaint was filed sometime in June 2018.  Furthermore, as discussed above, Plaintiff did not allege facts in the Complaint that Defendant had approved any foreclosure prevention alternative for Plaintiff.

Thus, demurer to this cause of action is SUSTAINED.

Negligence (6th Cause of Action)

The relationship between a lending institution and its borrower-client is not fiduciary in nature.  A commercial lender is entitled to pursue its own economic interests in a loan transaction. This right is inconsistent with the obligations of a fiduciary which require that the fiduciary knowingly agree to subordinate its interests to act on behalf of and for the benefit of another.  Plaintiff’s negligence cause of action fails because Plaintiff has not articulated any breach of duty outside the traditional lender-borrower relationship.

[A]s a general rule, a financial institution owes no duty of care to a borrower when the institution’s involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money. Thus, for example, a lender has no duty to disclose its knowledge that the borrower’s intended use of the loan proceeds represents an unsafe investment. []  The success of the borrower’s investment is not a benefit of the loan agreement which the lender is under a duty to protect.  [] Liability to a borrower for negligence arises only when the lender actively participates in the financed enterprise beyond the domain of the usual money lender.[]

(See Nymark v. Heart Fed. Sav. & Loan Ass’n (1991) 231 Cal.App.3d 1089, 1096.)

Lenders do not have a common-law duty of care in negligence, to offer, consider, or approve a loan modification, to offer foreclosure alternatives, or to handle loans so as to prevent foreclosure. (Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App. 4th 49, 68.)

“[W]hen the [financial] institution’s involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money,” the institution owes no duty of care to the borrower.  (Nymark v. Heart Fed. Sav. & Loan Ass’n (1991) 231 Cal.App.3d 1089; see Wagner v. Benson (1980) 101 Cal.App.3d 27, 35 (“Liability to a borrower for negligence arises only when the lender actively participates in the financed enterprise beyond the domain of the usual money lender.”).)  Further, bank advice directly related to loan modification, is within the scope of a conventional role as a lender and does not support a lender duty in negligence or negligent infliction of emotional distress.  (Ragland v. U.S. Bank National Assn. (2012) 209 Cal.App.4th 182, 207.)

The California Courts of Appeal have reached different conclusions as to whether lenders owe borrowers a duty of care when considering a loan modification application.  (Cf. Lueras, supra, 221 Cal.App.4th at 67 (residential loan modification is a traditional lending activity, and does not create a duty of care), with Alvarez v. BAC Home Loans Servicing, L.P. (2014) 228 Cal.App.4th 941, 948 (servicer has no general duty to offer modification, but a duty does arise when servicer agrees to consider borrower’s application for modification).)  The California Supreme Court has not spoken on this issue, and until the conflicting authority is resolved, this Court agrees with the findings in Lueras.  It is unclear how considering an application for the renegotiation of loan terms could fall outside the scope of a lender’s “conventional role as a lender of money.”  (See Nymarksupra, 231 Cal.App.3d at 1096.)

Plaintiff alleges that because Defendant accepted to review Plaintiff’s complete loan modification application, Defendant acted beyond a typical lender.  (Complaint, ¶ 70.)  This allegation, however, does not indicate how Defendant actively participated in Plaintiff’s financed enterprise that would put Defendant outside the scope of conventional arms-length lending activity.  (Nymarksupra, 231 Cal.App.3d at 1096-97.)  Plaintiff alleges that when Defendant accepted to review Plaintiff’s loan modification, Defendant became active participants in Plaintiff’s enterprise as agents of Plaintiff.  Even assuming Plaintiff’s allegations are true, Defendant had the discretion to approve or deny the loan modification.  As a result, the Court cannot find Defendant owed Plaintiff a legal duty as a mere lender of money.

Demurrer is SUSTAINED.

Violation of CA Bus & Prof Code § 17200 (7th Cause of Action)

The Unfair Business Practices Act shall include “any unlawful, unfair or fraudulent business act or practice.”  (Bus. & Prof. Code § 17200.)  A plaintiff alleging unfair business practices under these statutes must state with reasonable particularity the facts supporting the statutory elements of the violation.  (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 619.)  Even a single incident – a one-time act that is unfair, unlawful or fraudulent – is sufficient to state a claim under 17200.  (Klein v. Earth Elements, Inc. (1997) 59 Cal.App.4th 965, 969, fn. 3.)

The Court finds that Plaintiff’s allegations do not support a claim of an unfair business practice.  Plaintiff states in a conclusory manner that Defendant had committed unfair business practices but fails to state facts that indicated what they specifically did that was an unfair business practice.  Not only are Plaintiff’s “specific” examples described in general terms, they also do not state how these alleged misconducts are likely to deceive California consumers within the meaning of Section 17200.  (Complaint, ¶ 88.)

Therefore, Defendant’s demurrer to Plaintiff’s Complaint is SUSTAINED.