Judge: Alison Mackenzie, Case: 22STCV34130, Date: 2024-04-30 Tentative Ruling
Case Number: 22STCV34130 Hearing Date: April 30, 2024 Dept: 55
NATURE OF PROCEEDINGS:
Defendant Wescom Central Credit Union’s Demurrer to First Amended Complaint of
Plaintiff Patricia Munoz.
BACKGROUND
PATRICIA MUNOZ (“Plaintiff”) brings this case against WESTCOM
CREDIT UNION (“Defendant”), alleging that Defendant did not offer her any
alternatives to foreclosure on her home, issued a Notice of Default lacking required
elements of disclosures, and issued no denial letter after Plaintiff orally
requested a loan forbearance. Also, the purported Trustee, Integrated Lender
Services, relates to no existing substitution of trustee. The causes of action in
the First Amended Complaint (“FAC”) are: 1) Violation of Civ. Code § 2923.5; 2)
Violation of Civ. Code § 2924(a)(1); 3) Violation of Civ. Code § 2924.9; 4)
Wrongful Foreclosure; 5) Interpleader Pursuant to Code Civ. Proc. §386, Civ.
Code §§ 2924j and 2924k; 6) Unfair Business Practices, Violation of Bus. &
Prof. Code § 17200, et seq.; and 7) Cancellation of Written Instruments, Civ. Code
§ 3412.
Defendant has filed a demurrer to the FAC. Plaintiff
opposes the demurrer.
LEGAL STANDARD
Demurrers are to be sustained where a pleading fails
to plead adequately any essential element of the cause of action. Cantu v.
Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 879-880.
REQUEST FOR JUDICIAL NOTICE
The Court grants Defendant’s request for judicial
notice except to the extent disputed by Plaintiff’s allegations and arguments
in opposition. E.g., Intengan v. Bac Home Loans Servicing LP (2013) 214
Cal.App.4th 1047, 1057-1058 (judicial notice of recorded documents unauthorized
where complaint disputes them).
ANALYSIS
1. First
Cause of Action - Civil Code Section 2923.5
Defendant argues that this claim for violation of
Civil Code Section 2923.5 fails because that statute does not apply after a
foreclosure sale, as is the case here. The remedy under Civil Code Section
2923.5 (re contacting homeowners about possible loan modifications) is limited
to obtaining a postponement of an impending foreclosure to permit the lender to
comply with the section, and noncompliance does not affect the title as to
foreclosures that have already been held. E.g., Skov v. U.S. Bank Nat’l
Assoc. (2012) 207 Cal.App.4th 690, 698.
Plaintiff admits that foreclosure sale occurred. See
FAC, ¶¶ 14-18. As a matter of law, the First Cause of Action fails because the
foreclosure occurred, and the statutory remedy of postponing a foreclosure is
moot. Plaintiff does not address the specific argument raised by Defendant as
to this claim. See Opposition, pp. 3-4. By silence on the issue, Plaintiff
fails to support requested leave to amend. In order to obtain leave to amend,
complainants must state how the allegations would be amended in order to state
a cause of action. Drum v. San Fernando Valley Bar Ass'n (2010) 182
Cal.App.4th 247, 253.
Defendant also contends that judicial notice of the
recorded Notice of Default shows it properly includes a declaration in
compliance with the section, which makes Plaintiff’s allegations uncertain.
“[A] court may take judicial notice of the fact of a
document's recordation, the date the document was recorded and executed, the
parties to the transaction reflected in a recorded document, and the document's
legally operative language, assuming there is no genuine dispute regarding the
document's authenticity. From this, the court may deduce and rely upon the
legal effect of the recorded document, when that effect is clear from its
face.” Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 265, disapproved
on other grounds by Yvanova v. New Century Mortg. Corp. (2016) 62 Cal.
4th 919, 939 (Yvanova). Here, judicial notice of the Notice of Default
contradicts Plaintiff’s allegations of lack of statutory compliance and there
is no allegation that the notice itself is in dispute. Request for Judicial
Notice, Ex. B. Plaintiff contests the sufficiency of the Notice of Default. See
FAC, ¶ 15. Nevertheless, Plaintiff has not alleged prejudice caused by a defective
notice of default by lacking forbearance information. Cf., Debrunner v.
Deutsche Bank Nat. Trust Co. (2012) 204 Cal.App.4th 433, 443 (failure to allege prejudice caused by
defective notice of default failing to identify the beneficiary and identifying
a trustee before a recorded substitution).
Thus, the demurrer is sustained, without leave to
amend, as to the First Cause of Action.
2. Second
Cause of Action - Civ. Code § 2924(a)(1)
Defendant asserts that a violation of Section
2924(a)(1) does not support injunctive relief as sought by Plaintiff. Plaintiff
does not address this. See Opposition, pp. 4-5.
Under the Homeowners Bill of Rights, injunctive relief
is governed exclusively by Civil Code sections 2924.12(a)(1) and 2924.19(a)(1),
which do not authorize enjoining a violation of Section 2924(a). Lucioni v.
Bank of Amer., N.A. (2016) 3 Cal.App.5th 150, 155, 163.
Because the cited section does not support injunctive
relief and such relief is unavailable post-foreclosure, this Cause of Action
lacks merit, as to that part. But Plaintiff alleges both injunctive relief and
damages. E.g., FAC ¶¶ 23 and 31. A demurrer does not lie as to only a claim for
relief where some valid claim is alleged. E.g., Caliber Bodyworks, Inc. v.
Superior Court (2005) 134 Cal.App.4th 365, 384, disapproved on other
grounds by ZB, N.A. v. Superior Court (2019) 8 Cal.5th 175, 196, fn. 8.
Defendant also contends that, to the extent Plaintiff
claims Defendant violated Section 2924(a)(1) because Defendant did not hold the
note, the claim fails because possession of the note is not a precondition to
non-judicial foreclosure under a deed of trust and a sale to a bona fide
purchaser. As to deeds of trust, as distinguished from mortgages, trustees may
initiate foreclosure, without the prior recording of assignments of
beneficial interests evidencing current holders of promissory notes having the
power to sell properties. Haynes v. EMC Mortgage Corp. (2012) 205 Cal.
App. 4th 329, 336. A nonjudicial foreclosure
sale is presumed to have been conducted regularly and so the burden of proof
rests with challenging parties to allege and prove an invalid assignment
of the note. Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th
256, 270.
While alleged failure to record a substitution of the
trustee would be immaterial to the ability to foreclose, Plaintiff further alleges
that there is no substitution of the trustee, which infers an unassigned deed
of trust, and meets the burden to show the lack of a valid assignment of the
note, bringing into question Defendant’s request for judicial notice. See FAC ¶
17. “[O]nly the original beneficiary of a deed of trust or its assignee or
agent may direct the trustee to sell the property, [and] an allegation that the
assignment was void, and not merely voidable at the behest of the parties to
the assignment, will support an action for wrongful foreclosure.” Yvanova v.
New Century Mortgage Corp. (2016) 62 Cal.4th 919, 923.
Finally, nowhere does the FAC admit that the buyer was
a bona fide purchaser for value, which means Plaintiff can still rebut the
presumption of a regular sale. See 6 Angels, Inc. v. Stuart-Wright Mortgage,
Inc. (2001) 85 Cal.App.4th 1279, 1286 (“Thus, once a deed reciting that all
legal requirements have been satisfied has been transferred to a buyer at a
foreclosure sale, the sale can be successfully attacked on the grounds of
procedural irregularity only if the buyer is not a bona fide purchaser.”)
Hence, the
Court overrules the demurrer, as to the Second Cause of Action.
3. Third
Cause of Action - Civil Code § 2924.9
According to Defendant, the FAC admits that there were
exhaustion of loan modification alternatives and correspondence, such that Section
2924.9 did not require the mortgage servicer to communicate more information.
FAC ¶ 10, Ex. B.
After a trustee’s deed upon sale was recorded, a
mortgage servicer shall be liable to a borrower for actual economic damages
resulting from material violations of sections including Section 2924.9, if the
violation was not corrected and remedied prior to the recordation of the
trustee's deed upon sale. Monterossa v. Sup. Ct. (2015) 237 Cal. App.
4th 747, 753.
Here, the FAC does not admit exhaustion and proper
correspondence, but alleges to the contrary. See, e.g., FAC ¶¶ 10-18. The Opposition
argues similarly- that the Notice of Default’s declaration states that Plaintiff
was contacted but actually Plaintiff never received phone calls or mail in
regard to foreclosure alternatives. Opposition, 5:1-2.
Therefore, the demurrer is overruled as to the Third
Cause of Action.
4. Fourth
Cause of Action – Wrongful Foreclosure
Defendant argues that the wrongful foreclosure claim fails
because Plaintiff fails to allege she tendered the full amount of the outstanding
loan, and her purported reasons for not doing so do not constitute legal
grounds for excusing tender.
The elements of a claim for wrongful foreclosure are:
“‘(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.’” Miles v.
Deutsche Bank National Trust Co. (2015) 236 Cal.App.4th 394, 408.
Recognized exceptions to the requirement to tender the
debt include that the trustee lacked power to convey the property. Lona v. Citibank, N.A. (2011) 202
Cal.App.4th 89, 112-113. A void assignment supports a claim for wrongful
foreclosure. Yvanova, supra, 62 Cal.4th at p. 923. A borrower need not tender the full amount of the mortgage indebtedness
as a prerequisite for bringing an action under Civil Code Section 2923.5. Mabry
v. Sup.Ct. (2010) 185 Cal.App.4th 208, 225. Claims under Section 2923.5
concern first contacting homeowners about a possible loan modification before
issuing a notice of default Civil Code Section 2923.5. Ibid. A borrower
need not tender the loan balance before filing suit for monetary damages based
on a violation of the requirements of the California Homeowner Bill of Rights
(HBOR). Valbuena v. Ocwen Loan Servicing, LLC (2015) 237 Cal.App.4th
1267, 1274 (“a tender of the amount due under the loan is not required to state
a cause of action under [Civil Code] section 2923.6.”). In other words, plaintiffs
not relying only upon equity in attacking a deed and foreclosure, are not
required to tender any amounts due under the note. Dimock v. Emerald Properties (2000) 81
Cal. App. 4th 868, 878.
Plaintiff responds that, because the foreclosure sale
was void for lack of trustee substitution, tender is not required.
Additionally, Plaintiff argues that supportive violations include section 2924,
subdivision (c) requiring notices that were not given, and section 2923.5,
subdivision (a)(1) requiring explored foreclosure alternatives.
Here, the FAC sufficiently alleges the excuses of an
absent trustee substitution, and an action partly based on Section 2923.5 and
related sections. E.g., FAC, ¶¶ 17, 39 and 40.
Thus, the Demurrer is overruled as to the Fourth Cause
of Action.
5. Fifth
Cause of Action – Interpleader
Defendant argues that the claim for Interpleader is
moot because Defendant’s trustee Integrated Lender Services filed a Complaint
in Interpleader regarding the surplus funds from the foreclosure sale. Defendant
cites no authority for the position that the demurrer should be sustained while
there is a separate interpleader action pending. Demurrer, 20:24 – 21:3.
For the rule of another action pending to apply, and
result in a plea in abatement, the same parties and causes of action must be
involved, such that a judgment in the earlier action would become res judicata
in the later one. E.g., Bush v. Superior Court (1991) 10 Cal.App.4th
1374, 1384.
Here, a complaint for interpleader by Integrated
Lender Services would not become res judicata in this case that alleges many
more causes of action. The Court therefore overrules the demurrer as to the
Fifth Cause of Action.
6. Sixth
Cause of Action – Unfair Business Practices
Defendant contends that the FAC is uncertain and
conclusory as to Defendant’s allegedly unfair business practices.
Generally, the viability of the claim depends upon
whether the underlying causes of action withstand scrutiny. E.g., Graham v.
Bank of America, N.A. (2014) 226 Cal. App. 4th 594, 610 (“The SAC does not allege a violation of law
to support a UCL claim. The trial court correctly determined the defendants
cannot be held liable for unlawful business practices where there is no
violation of another law.”).
Here, as analyzed above, the FAC sufficiently has alleged
some claims of violations. Those support the claim for Unfair Business
Practices.
Further, any uncertainty is a matter for discovery. “[D]emurrers
for uncertainty are disfavored, and are granted only if the pleading is so
incomprehensible that a defendant cannot reasonably respond.” A.J. Fistes
Corp. v. GDL Best Contractors, Inc. (2019) 38 Cal.App.5th 677, 695
(internal quotation omitted).
Thus, the Court overrules the demurrer as to the Sixth
Cause of Action.
7. Seventh
Cause of Action – Cancellation of Written Instruments
Quoting from Ephraim v. Metropolitan Trust Co.
(1946) 28 Cal.2d 824, 833-834, Defendant contends that the FAC must allege
specific facts, “not mere conclusions, showing the apparent validity of the
instrument designated, and point out the reason for asserting that it is
actually invalid.”
An allegedly void foreclosure can support a claim for
cancellation of instruments. Sciarratta v. U.S. Bank National Assn.
(2016) 247 Cal.App.4th 552, 568. See also Kroeker v. Hurlbert (1940) 38
Cal.App.2d 261, 266 (“In actions to
cancel a certain instrument it is necessary for the complaint to state a case
within the code sections for which reason it is essential to allege the facts
affecting the validity and invalidity of the instrument which is attacked.”).
Here, fraud, which must be alleged specifically, is
not the only basis that Plaintiff alleged in support of cancellation. Instead,
paragraph 71 of the FAC incorporates by reference all previous allegations. As
analyzed above, the FAC alleges grounds for a void foreclosure, such as no
trustee substitution. FAC, ¶ 17.
As a result, the Court overrules the demurrer as to
the Seventh Cause of Action.
CONCLUSION
The Court sustains the demurrer without leave to amend
as to the First Cause of Action, and otherwise overrules it.
Twenty days to answer.