Judge: Alison Mackenzie, Case: 23STCV27216, Date: 2025-02-18 Tentative Ruling
Case Number: 23STCV27216 Hearing Date: February 18, 2025 Dept: 55
NATURE OF PROCEEDINGS: Hearing on Defendants' Demurrer
Defendants' Demurrer
is sustained with leave to amend.
BACKGROUND
Plaintiff Ruth Thomas
Jones-Sawyer filed this action against defendants Erin Holman (Holman), Reverse Mortgage Funding, LLC,
TIB Reverse Mortgage Loan Servicing, and Mortgage Electronic Registration
System (collectively “Defendants”), alleging that Holman took advantage of
Plaintiff by taking out a reverse mortgage in Plaintiff’s name and on
Plaintiff’s real property.
The causes of action in the First Amended Complaint are: 1) Financial
Elder Abuse; 2) Elder Abuse; 3) Negligence: 4) Negligent Misrepresentation; 5) Undue
Influence; 6) Actual Fraud; 7) Constructive Fraud; 8) Breach of Fiduciary Duty; 9) Quiet Title; 10) Cancellation of
Instrument; 11) Declaratory and Injunctive Relief; and 12) Recission of
Contract.
Defendants TIB Reverse
Mortgage Loang Servicing (TIB) and Mortgage Electronic Registration System
(MERS) (collectively “Demuring Defendants”) filed a Demurrer. Plaintiff did not file an Opposition.
REQUEST FOR JUDICIAL NOTICE
Defendants request the Court take judicial notice of the
following documents:
1) The original Complaint filed by Plaintiff Ruth Thomas
Jones-Sawyer ("Plaintiff') on November 7, 2023
2) The Stipulation and Order Granting Leave to File Second
Amended Complaint, filed by Plaintiff on June 24, 2024
(3) This Court's July 2, 2024 Minute Order re: Stipulation
for Leave to File Second Amended Complaint
Defendants’ request for judicial notice is granted.
LEGAL STANDARD
When considering demurrers, courts read the allegations
liberally and in context. Wilson v. Transit Authority of City of Sacramento
(1962) 199 Cal.App.2d 716, 720-21. 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
pleading alone, and not on the evidence or facts alleged.” E-Fab, Inc. v.
Accountants, Inc. Servs. (2007) 153 Cal.App.4th 1308, 1315. As such, courts
assume the truth of the complaint’s properly pleaded or implied factual
allegations. Ibid. However, it does not accept as true deductions,
contentions, or conclusions of law or fact. Stonehouse Homes LLC v. City of
Sierra Madre (2008) 167 Cal.App.4th 531, 538.
Leave to amend must be allowed where there is a reasonable
possibility of successful amendment. See Goodman v. Kennedy
(1976) 18 Cal.3d 335, 349 (court shall not “sustain a demurrer without leave to
amend if there is any reasonable possibility that the defect can be cured by
amendment”); Kong v. City of Hawaiian Gardens Redevelopment Agency
(2002) 108 Cal.App.4th 1028, 1037 (“A demurrer should not be sustained without
leave to amend if the complaint, liberally construed, can state a cause of
action under any theory or if there is a reasonable possibility the defect can
be cured by amendment.”). The burden is on the complainant to show the Court
that a pleading can be amended successfully. Blank v. Kirwan (1985) 39
Cal.3d 311, 318.
ANALYSIS
A. Elder Abuse Claims
“The Elder Abuse Act defines ‘abuse’ as ‘[p]hysical abuse,
neglect, abandonment, isolation, abduction, or other treatment with resulting
physical harm or pain or mental suffering,’ ‘deprivation by a care custodian of
goods or services that are necessary to avoid physical harm or mental
suffering,’ or ‘[f]inancial abuse, as defined in Section 15610.30.’” Arace
v. Medico Investments, LLC (2020) 48 Cal.App.5th 977, 982 (quoting Welf.
& Inst. Code § 15610.07, subd. (a)).
Financial abuse of an elder occurs when a person or entity
does or assists with any of the following: “‘[¶] (1)Takes, secretes,
appropriates, obtains, or retains real or personal property of an elder or
dependent adult for a wrongful use or with intent to defraud, or both. [¶] (2)
Assists in taking, secreting, appropriating, obtaining, or retaining real or
personal property of an elder or dependent adult for a wrongful use or with
intent to defraud, or both. [¶] (3) Takes, secretes, appropriates, obtains, or
retains, or assists in taking, secreting, appropriating, obtaining, or
retaining, real or personal property of an elder or dependent adult by undue
influence,’ as defined in [Welfare and Institutions Code] section 15610.70. Mahan
v. Charles W. Chan Ins. Agency, Inc. (2017) 14 Cal.App.5th 841, 856
(quoting Welf. Inst. Code §15610.30, subd. (a)).
Plaintiff’s first cause of action alleges that Holman
fraudulently obtained a reverse mortgage in her mother’s name. Additionally,
Plaintiff alleges that TIB denied her any information concerning the loan
because she is not identified as the borrower. FAC at p. 9:7-9. Because the
Complaint does not contain any allegations that Demurring Defendants assisted
Holman in obtaining the allegedly fraudulent reverse mortgage, Plaintiff failed
to allege facts supporting a claim for Financial Elder Abuse. Likewise, the
second cause of action for Elder Abuse only alleges Holman engaged in wrongdoing.
Accordingly, Demurring Defendants’ demurrer to the first and second cause of
action is sustained with leave to amend.
B. Duty of Care
Demurring Defendants argue that Plaintiff’s third cause of
action for negligence, seventh cause of action for constructive fraud, and
eighth cause of action for breach of fiduciary duty all fail as a matter of law
because they did not owe Plaintiff a duty of care.
1. Negligence
“The existence of a duty of care owed by a defendant to a
plaintiff is a prerequisite to establishing a claim for negligence.” Nymark v. Heart Fed. Savings & Loan
Assn. (1991) 231 Cal.App.3d 1089, 1095. “[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.” Id. at 1096. The economic loss rule generally provides that
“there is no recovery in tort for negligently inflicted ‘purely economic
losses,’ meaning financial harm unaccompanied by physical or property damage. Sheen
v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 922.
The Court agrees that Plaintiff fails to state a claim for
negligence because Demurring Defendants did not owe Plaintiff a duty of care,
and the economic loss rule bars such a claim.
2. Breach of Fiduciary Duty
“The elements of a cause of action for breach of fiduciary
duty are the existence of a fiduciary relationship, its breach, and damage
proximately caused by that breach.” Meister v. Mensinger (2014) 230
Cal.App.4th 381, 395.
Here, Plaintiff fails to allege facts giving rise to a
fiduciary duty between her and the Demurring Defendants. Financial institutions
do not have a fiduciary relationship with borrowers. See Sheen, supra,12
Cal.5th at p. 931 (contrasting the quasi-public and quasi-fiduciary
relationship between insurers and insured with the typical contractual
relationship between financial institutions and their customers). Accordingly,
the demurrer is sustained with leave to amend.
3. Constructive Fraud
“Constructive fraud ‘is a unique species of fraud applicable
only to a fiduciary or confidential relationship.’ Constructive fraud ‘arises
on a breach of duty by one in a confidential or fiduciary relationship to
another which induces justifiable reliance by the latter to his prejudice.’” Prakashpalan
v. Engstrom, Lipscomb & Lack (2014) 223 Cal.App.4th 1105, 1131
(citations omitted) (internal quotation marks omitted).
As explained above, there is no fiduciary relationship
between the Demurring Defendants and Plaintiff. Additionally, the constructive
fraud cause of action only alleges acts committed by Holman. Accordingly, the
demurrer is sustained with leave to amend.
C. Fraud Claims
Demurring Defendants argue that the fourth (negligent
misrepresentation), fifth (undue influence), and sixth (actual fraud) causes of
action all fail because Plaintiff does not allege they made a material
misrepresentation.
“The elements of negligent misrepresentation are (1) the
defendant made a false representation as to a past or existing material fact;
(2) the defendant made the representation without reasonable ground for
believing it to be true; (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.” Majd v.
Bank of America, N.A. (2015) 243 Cal. App. 4th 1293, 1307. “The tort of
negligent misrepresentation is similar to fraud, except that it does not
require scienter or an intent to defraud.” Tenet Healthsystem Desert,
Inc. v. Blue Cross of California (2016) 245 Cal.App.4th 821, 845. Like
fraud claims, negligent misrepresentations claims are subject to heightened
pleading standards. See Small v. Fritz Companies, Inc. (2003) 30 Cal.4th
167, 184.
The fraud and undue influence causes of action do not
include any allegations against Demurring Defendants. Additionally, the negligent
misrepresentation claim alleges that Defendants misrepresented the documents
she was signing but includes no detail as to what those misrepresentations
consisted of or who made them. Compl. at p. 13. This fails to meet the
heightened pleading standard. Accordingly, the demurrer to the fourth, fifth,
and sixth causes of action is sustained with leave to amend.
D. Remedies
Because the fraud claims fail, Demurring Defendants argue
that the tenth and twelfth counts for cancellation of instrument and rescission
must also fail.
Civil Code section 3412 provides, “A written instrument, in
respect to which there is a reasonable apprehension that if left outstanding it
may cause serious injury to a person against whom it is void or voidable, may,
upon his application, be so adjudged, and ordered to be delivered up or
canceled.” “Cancellation of an instrument is essentially a request for
rescission of the instrument.” Deutsche Bank National Trust Co. v. Pyle
(2017) 13 Cal.App.5th 513, 523 (citing Bank of America v. Greenbach
(1950) 98 Cal.App.2d 220, 228). “The remedy of rescission extinguishes the
contract (Civ. Code, § 1688) and restores the parties to their former positions
by requiring them to return whatever consideration they have received.” Koenig
v. Warner Unified School Dist. (2019) 41 Cal.App.5th 43, 59-60.
“[T]he [California]Supreme Court held a deed voidable, not
void if obtained as a result of undue influence or compulsion. Such a deed
‘stands on the same footing as a deed procured by fraud.’ The court concluded
that a deed or mortgage procured by duress cannot be set aside as against a
party purchasing in ignorance of the facts constituting the duress, that is to
say, as against a purchaser for a valuable consideration and without notice of
the duress. Fallon v. Triangle Management Servs. (1985) 169 Cal.App.3d
1103, 1106 (citing Conn. Life Ins. Co. v. McCormick (1873) 45 Cal. 580).
Here, in addition to Plaintiff’s fraud claims failing
against Demurring Defendants, she also fails to allege that she returned the value
received in exchange for the reverse mortgage. Accordingly, the Demurring
Defendants’ demurrer to the tenth and twelfth cause of action is sustained with
leave to amend.
E. Quiet Title
Because Plaintiff’s quiet title claim is derivative of her
fraud claims, the Court likewise sustains the demurrer with leave to amend.
See Leeper v. Beltrami (1959) 53 Cal.2d 195, 214 (“[W]here the legal title
is in the defendant, and the plaintiff seeks to quiet title on the ground
defendant's title was secured from plaintiff by fraud, the plaintiff must plead
and prove facts constituting the fraud.”).
F. Declaratory and Injunctive Relief
“The fundamental basis of declaratory relief is the
existence of an actual, present controversy over a proper subject.” Linda
Vista Village San Diego Homeowners Assn., Inc. v. Tecolote Investors, LLC
(2015) 234 Cal.App.4th 166, 181 (citations omitted) (internal quotation marks
omitted). “In the context of a demurrer, the courts evaluate whether the
factual allegations of a complaint for declaratory relief reveal that an
actual, ripe controversy exists between the parties.” Ibid.
Here, Plaintiff alleges an actual controversy exists between
her and “Defendant” (singular). In context, it is clear this refers to Holeman.
Therefore, Plaintiff has failed to allege an actual controversy against Demurring
Defendants.
Because the Court sustained the demurrers to the underlying
cause of actions, it likewise sustains the demurrer to the request for injunctive
relief. See Allen v. City of Sacramento (2015) 234 Cal.App.4th
41, 65 (“‘A permanent injunction is merely a remedy for a proven cause of
action. It may not be issued if the underlying cause of action is not
established.’”) (quoting Camp v. Board of Supervisors (1981) 123
Cal.App.3d 334) (internal quotation marks omitted.)
G. Punitive Damages
Plaintiff mistakenly pleads punitive damages as a thirteenth
cause of action. Because the Court sustained the demurrer to the underlying
fraud causes of action, it likewise sustains the demurrer to the request for punitive
damages.
CONCLUSION
Defendants' Demurrer is sustained. Plaintiff has twenty
days leave to amend.