Judge: Alison Mackenzie, Case: 23STCV27937, Date: 2024-07-08 Tentative Ruling
Case Number: 23STCV27937 Hearing Date: July 8, 2024 Dept: 55
NATURE OF PROCEEDINGS:
Demurrer of PHH Mortgage Corporation and Mortgage Assets Management, LLC to the
First Amended Complaint.
BACKGROUND
ROBERT M. ABER, an individual and trustee of the
Robert M. Aber Revocable Living Trust Created February 11, 2004 (“Plaintiff”) filed
this case against PHH MORTGAGE CORPORATION, MORTGAGE ASSETS MANAGEMENT (“Defendants”)
and other defendants related to defendants allegedly enabling Plaintiff’s estranged
sons to fraudulently sell Plaintiff’s home, when they knew or should have known
of the fraud.
Plaintiff’s causes of action in the First Amended
Complaint (“FAC”) are:
1) Violations of Welfare
& Institutions Code §15600 et seq. (Elder Abuse)
2) Violations of Civil
Code § 1798.93
3) Violations of Civil
Code § 2924.11
4) Violations of Civil
Code § 2924.17
5) Violations of Civil
Code § 3273.11
6) Violations of the Home
Equity Sales Contract Act (HESCA), Civil Code §1695
7) Slander of Title
8) Unfair Business
Practices
9) Violations of the
Rosenthal Act
10) Negligence
11) Breach of Contract
12) Breach of the Implied
Covenant
13) Fraud
14) Negligent
Misrepresentation
15) Intentional
Interference with Contract
16) Quiet Title
17) Cancellation of Deed.
Defendants demur to all claims of the FAC except the
Sixth, Ninth, Sixteenth and Seventeenth. Plaintiff opposes the demurrer.
JUDICIAL NOTICE
The Court sustains Plaintiff’s objection to Defendants’
request for judicial notice of twelve recorded documents and letters.
A trial court errs in taking judicial notice of facts
contained in recorded documents, where they are in dispute. Herrera v.
Deutsche Bank Nat. Trust Co. (2011) 196 Cal.App.4th 1366, 1375 (addressing
recorded assignment of deed and substitution of trustee, and reversing summary
judgment where bank defendant failed to show it was a beneficiary under deed of
trust).
"'When judicial notice is taken of a document ...
the truthfulness and proper interpretation of the document are
disputable." Aquila, Inc. v. Superior Court (2007) 148 Cal.App.4th
556, 569.
Content on official sites on the Internet is not
automatically the proper subject of judicial notice. Jolley v. Chase Home
Finance, LLC (2013) 213 Cal.App.4th 872, 889 (trial court erred in taking
judicial notice of a private contract between a bank and the Federal Deposit
Insurance Corporation).
Letters are not properly the subject of judicial
notice, where the contents do not fall within the lists in Evidence Code
sections 451 and 452 or authorizing case law. Tenet Healthsystem Desert,
Inc. v. Blue Cross of Cal. (2016) 245 Cal.App.4th 821, 836.
The Court grants Plaintiff’s unopposed request for
judicial notice of the Notice of Trustee’s Sale.
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.
In ruling upon demurrers, courts treat as being true
“not only the complaint's material factual allegations, but also facts that may
be implied or inferred from those expressly alleged.” Poseidon Development,
Inc. v. Woodland Lane Estates, LLC (2007) 152 Cal.App.4th 1106, 1111-1112.
ANALYSIS
First
Cause of Action - Assisting Financial Elder Abuse
Defendants state that Plaintiff’s elder abuse cause of
action fails to allege aiding and abetting the property sale, based on the
allegations of providing a payoff quote to someone they were “duped” into
thinking was Plaintiff, and then accepting the loan payoff.
A claim for financial elder abuse includes defendants’
obtaining or retaining real or personal property of an elder for a wrongful use
or with intent to defraud, or defendants’ assisting in that. Knox v. Dean
(2012) 205 Cal.App.4th 417, 423, 431.
Here, the FAC contains allegations of factual
circumstances supporting allegations that Defendants knowingly participated in
aiding and abetting the sons’ use of Plaintiff’s identity to accomplish
property-related transactions. E.g., FAC ¶¶ 178-186.
Therefore, the Court overrules the demurrer as to this
claim.
Second
Cause of Action - Violation of the California Identity Theft Act (CITA)
Defendants argue that CITA does not apply to them,
because the reverse mortgage was not obtained through identity theft, and they
have no claim against Plaintiff.
An opinion reports similar facts to this case involving
identity theft: “[S]he was a victim of identity theft (see Civ.Code, § 1798.93,
subd. (b)) and specifically … her personal identifying information was
misappropriated and used to obtain the property. The lending institution would
have paid the surplus to the identity thief had he or she continued in the
fraudulent activity.” CTC Real Est. Servs. v. Lepe (2006) 140
Cal.App.4th 856, 860–861.
As for whether aiding and abetting applies to Civil
Code section 1798.93, the Court found no governing and citable case on point. Generally,
“[v]iolation of a statutory duty to another may therefore be a tort….” South
Bay Building Ent., Inc. v. Riviera Lend-Lease, Inc. (1999) 72 Cal.App.4th
1111, 1123. The Court concludes that the cited statute referencing theft is
akin to the tort of conversion, and serves as a basis for alleging aiding and
abetting. See generally Am. Master Lease LLC v. Idanta Partners, Ltd.
(2014) 225 Cal.App.4th 1451, 1477 (aider and abettor may owe a duty to the
victim while providing substantial assistance, or commit an independent tort by
making a conscious decision to assist others with their wrongful acts.)
Here, the FAC sufficiently alleges that Defendant PHH,
for its own financial benefit, assisted in the sons’ identity theft while
knowing of obvious forgeries and other fraud. E.g., FAC, ¶¶ 80-82, and 136-145.
Therefore, the Court overrules the demurrer as to this
claim.
Third Cause of Action - Violation
of Civil Code § 2924.11 and Fourth Cause of Action - Violation of Civil Code §
2924.17
Defendants contend that relief is not available under
the Homeowner Bill of Rights (HBOR) because the deed of trust was reconveyed
and no foreclosure is pending.
Civil Code Section 2924.12 allows a borrower to bring
a cause of action for injunctive relief for material violation of certain
sections. As subdivision (a)(1) notes: “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, 2924.10,
2924.11, or 2924.17.” After a foreclosure sale and recording of a trustee’s
deed upon sale, damages for violations of Civil Code sections including 2024.11
and 2924.17, may be available. E.g., Monterossa v. Superior Court (2015)
237 Cal. App. 4th 747, 753. An injunction can be an order requiring a person to
refrain from a particular act, or to perform an act. People ex rel. Gwinn v.
Kothari (2000) 83 Cal.App.4th 759, 765.
Here, the FAC properly seeks an injunction mandating Defendants
to rescind the reconveyance and to restore Plaintiff’s title, due to alleged
violations of sections 2924.11 and 2924.17.
Therefore, the Court overrules the demurrer as to this
claim.
Fifth Cause of Action - Violation
of Civil Code § 3273.11
Defendants argue that no violation is alleged under
the COVID-19 Small Landlord and Homeowner Relief Act because Plaintiff does not
state when he first requested relief. As
stated above, the Court has denied Defendants’ request for judicial notice, and
so it concurs with Plaintiff that the disputes about requesting COVID-19 relief
cannot be resolved via demurrer.
Further, Plaintiff alleged facts that would suggest
Plaintiff obtained COVID-19 relief. FAC, ¶¶ 344-347.
Therefore, the Court overrules the demurrer as to this
claim.
Seventh Cause of Action -
Slander of Title
Defendants state that the reconveyance of the deed of
trust was privileged and did not harm Plaintiff’s interests in the property. There
has been a split of authority as to whether the absolute litigation privilege
applies to non-judicial foreclosures. Kachlon v. Markowitz (2008) 168
Cal. App. 4th 316, 337 (“to the extent Garretson concluded that the 1996
amendment makes the litigation privilege applicable to nonjudicial foreclosure,
we disagree….”). Malice under the common-interest privilege is more than
negligence, inadvertence, or carelessness, but instead must be a wanton and
reckless disregard of the rights and feelings of others. Ibid. at 344.
“‘If the matter is reasonably understood to cast doubt
upon the existence or extent of another's interest in land, it is disparaging
to the latter's title where it is so understood by the recipient….’” M.F.
Farming, Co. v. Couch Distributing Co. (2012) 207 Cal.App.4th 180, 198-199.
Here, the FAC sufficiently alleges that Defendants
reconveyed the property maliciously based upon fraud and thereby prevented
Plaintiff from dealing with the real property as his own. E.g., FAC, ¶¶
376-380.
Therefore, the Court overrules the demurrer as to this
claim.
Eighth Cause of Action - Unfair
Business Practices
Defendants reason that Plaintiff lacks standing to
bring a claim for unfair business practices, because they have nothing
belonging to Plaintiff.
Regarding the requirement to allege standing, including
injury and lost money or property, alleging an economic injury suffices. Boschma
v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 254.
In the FAC, Plaintiff adequately alleges that the
above-referenced violations support the claim based upon various economic
injuries caused by Defendants. E.g., FAC, ¶¶ 383, 384 and 409.
Therefore, the Court overrules the demurrer as to this
claim.
Tenth Cause of Action - Negligence
Defendants assert that Plaintiff’s negligence cause of
action fails because (1) they owed no duty to Plaintiff, (2) negligence is
barred by the economic loss doctrine, and (3) they did not cause the sons’
selling the property.
Generally, financial institutions owe no duty of care
to borrowers but there are exceptions where the Biakanja v. Irving
(1958) 49 Cal.2d 647, 650 factors apply. Jolley v. Chase Home Finance, LLC
(2013) 213 Cal.App.4th 872, 899, 906. “A bank may be liable in negligence if it
fails to discharge its contractual duties with reasonable care. “ Das v.
Bank of Amer., N.A. (2010) 186
Cal.App.4th 727, 741.
Here, the allegations sufficiently allege foreseeable
harm to Plaintiff by assisting the sons with taking Plaintiff’s identity for
handling his property interests, and by failing to perform the promissory note
arguably requiring that only Plaintiff make a loan payoff.
Further, tort actions may be authorized even though
they arise from contracts, despite the economic loss rule, such as cases
involving contracts for professional services. Sheen v. Wells Fargo Bank,
N.A. (2022) 12 Cal.5th 905, 929. See also McClung v. Watt (1922) 190
Cal. 155, 161 (“one who accepts the fruits of a fraud, with knowledge of the
misrepresentations or concealments by which the fraud was perpetrated, thereby
inferentially ratifies the fraud complained of and will be liable therefor even
though he did not personally participate in the fraud….”). To avoid the
economic-loss rule’s bar of tort damages, plaintiffs can be contracting parties
for services. North American Chemical Co. v. Superior Court (1997) 59
Cal.App.4th 764, 785, 787. See also Food Safety Net Services v. Eco Safe
Systems USA, Inc. (2012) 209 Cal.App.4th 1118, 1130 (regarding the economic
loss rule, “a party alleging fraud or deceit in connection with a contract must
establish tortious conduct independent of a breach of the contract itself,…”).
Here, the FAC sufficiently alleges Plaintiff’s
contracting for professional lender services and Defendants’ aiding and
abetting fraud independent of the promissory note.
Finally, as for causation, the FAC sufficiently
alleges Defendants’ aiding and abetting in the sons’ fraudulent activities, as
already addressed above.
Therefore, the Court overrules the demurrer as to this
claim.
Eleventh Cause of Action
- Breach of Contract
Defendants contend there was no contract
term stating that only Plaintiff could pay off the loan, and the others’ paying
it caused no damages. Plaintiff responds that terms of the promissory note and
deed of trust prohibit a payoff demand or payoff funds from Plaintiff’s sons.
Courts defer to plaintiffs’ reasonable
interpretations of contracts, in ruling upon demurrers. E.g., Performance
Plastering v. Richmond American Homes of Cal., Inc. (2007) 153 Cal.App.4th
659, 672.
Here, due to the promissory note’s
paragraph 2 providing that, “Borrower promises to pay…,” and paragraph 13
incorporating, “the consumer protection laws of the state in which the real estate
is located,” Plaintiff reasonably interprets the contract to provide for only Plaintiff’s payments and for Defendants’
compliance with California statutory provisions. See FAC, ¶¶ 470-471.
Therefore, the Court overrules the
demurrer as to this claim.
Twelfth Cause of Action -
Breach of the Implied Covenant of Good Faith and Fair Dealing
Defendants reason that there is no implied covenant alleged
because Plaintiff failed to plead that Defendant MAM denied him the benefit of
the bargain.
“In essence, the covenant is implied as a supplement
to the express contractual covenants, to prevent a contracting party from
engaging in conduct which (while not technically transgressing the express
covenants) frustrates the other party's rights to the benefits of the
contract.” Love v. Fire Ins. Exchange (1990) 221 Cal.App.3d 1136, 1153.
Here, the promissory note terms, addressed above under
breach of contract, arguably are ambiguous and imply requirements for Defendants
to provide for only Plaintiff’s payments and to comply with California
statutory provisions.
Therefore, the Court overrules the demurrer as to this
claim.
Thirteenth Cause of
Action – Fraud and Fourteenth Cause of Action - Negligent Misrepresentation
As to both fraud and negligent misrepresentation, Defendants
assert that Plaintiff fails to adequately allege the falsity of the
representations, reasonable reliance, and proximately caused damages.
The FAC adequately alleges that Defendants misrepresented
to Plaintiff that the loan was due and supported foreclosure, despite his
performance under the contract, upon which he relied in not acting against
foreclosure.
Analogously, a borrower sufficiently alleged
reasonable reliance upon fraud, and damages, as to a Trial Plan Agreement of a
bank, where the pleading stated that the borrower was caused to forego legal
action to stop the foreclosure sale. See West v. JPMorgan Chase Bank, N.A.
(2013) 214 Cal.App.4th 780, 805.
Moreover, the FAC alleges reliance, beyond foregoing
legal action, including entering into a payment plan to pay overcharges. E.g.,
FAC, ¶¶ 49, 495, 500-502, 511 and 518.
Therefore, the Court overrules the demurrer as to this
claim.
Fifteenth Cause of Action
- Intentional Interference with Contract
Defendants argue that Plaintiff’s claim for
intentional interference with contract against Defendant PHH fails because
Defendant PHH, as the agent of the contracting party, cannot wrongly interfere
with the contract.
Representatives of contracting parties, including
corporate agents, cannot be liable for intentional interference with their
principals’ contracts, and there is no individual-advantage exception to the
rule as it distinguishably applies to the agent-immunity rule and conspiracy. Mintz
v. Blue Cross of Cal. (2009) 172 Cal.App.4th 1594, 1604, 1606, 1607, fn. 5.
Plaintiff’s opposition addresses general agency
statutes for the stated proposition, but not the directly applicable case law.
Opp., 21:19-25. Additionally, the FAC contains no allegations to the effect
that PHH ever acted as a stranger to the contracts, but it instead repeatedly
alleges an agency relationship.
Further, the opposition proposes no successful
amendment in this regard, in order to justify leave to amend. Therefore, the
Court sustains the demurrer as to this claim, without leave to amend.
CONCLUSION
Therefore, the Court sustains the demurrer only as to
the Fifteenth Cause of Action, without leave to amend, and otherwise overrules
it.
Twenty days to answer the surviving allegations.