Judge Ashfaq G. Chowdhury, Case Number: 24GDCV00336, Date: 2024-06-13 Tentative Ruling

Judge: Ashfaq G. Chowdhury, Case: 24GDCV00336, Date: 2024-06-13 Tentative Ruling

Case Number: 24GDCV00336 Hearing Date: June 13, 2024 Dept: E

Hearing Date: 06/13/2024 – 8:30am

Case No: 24GDCV00336

Trial Date: UNSET

Case Name: ALBERTO DEVORA v. SELECT PORTFOLIO SERVICING, INC.; and DOES 1-10 inclusive

[TENTATIVE RULING ON DEFENDANT’S DEMURRER]

Moving Party: Defendant, Select Portfolio Servicing, Inc.

Responding Party: Plaintiff, Alberto Devora

RELIEF REQUESTED
“Defendant SELECT PORTFOLIO SERVICING, INC. (“Defendant”) will, and hereby does, demur to the verified complaint (“Complaint”) of ALBERTO DEVORA (“Plaintiff”), and the First, Second, Third, Fourth, and Fifth causes of action therein, on the grounds that each of the causes of action fails to state facts sufficient to constitute a cause of action, pursuant to Code of Civil Procedure §§ 430.10(e) and 430.10(g).

The Demurrer is based on this Notice, Demurrer and Memorandum of Points and Authorities, and Declaration of Paula Hernandez filed concurrently herewith, and such other and further matters as the court may properly consider at or before the hearing on the Demurrer.

Pursuant to Code of Civil Procedure § 430.41(a), Defendant’s counsel met and conferred with Plaintiff’s counsel regarding their Demurrer to the Complaint. (See Declaration of Paula B. Hernandez.)”

(Dem. p. 2.)

Procedural
16/21 Day Lapse (CCP § 12c and § 1005(b)): Ok
Proof of Service Timely Filed (CRC, Rule 3.1300): Ok
Correct Address (CCP § 1013, § 1013a): Ok

Moving Papers: Demurrer; Hernandez Declaration

Opposition Papers: Opposition

Reply Papers: Reply

BACKGROUND

Plaintiff, Alberto Devora, filed his verified complaint on 2/22/2024 alleging five causes of action for: (1) Violation of Civ. Code § 2923.5; (2) Violation of Civ. Code § 2923.7; (3) Violation of Civ. Code § 2924.9; (4) Violation of Civ. Code § 2924.10; and (5) Unfair Business Practices, Violation of Bus. & Prof. Code § 17200, et seq.

The instant action pertains to alleged violations pertaining to a foreclosure.

MEET AND CONFER
A party filing a demurrer “shall meet and confer in person or by telephone with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” (Code Civ. Proc., § 430.41, subd. (a).) “The parties shall meet and confer at least five days before the date the responsive pleading is due. If the parties are not able to meet and confer at least five days prior to the date the responsive pleading is due, the demurring party shall be granted an automatic 30-day extension of time within which to file a responsive pleading, by filing and serving, on or before the date on which a demurrer would be due, a declaration stating under penalty of perjury that a good faith attempt to meet and confer was made and explaining the reasons why the parties could not meet and confer.” (Code Civ. Proc., § 430.41(a)(2).)

Failure to sufficiently meet and confer is not grounds to overrule or sustain a demurrer. (Code Civ. Proc., § 430.41(a)(4).)

Defendant’s counsel, Paula B. Hernandez, alleges that a meet and confer occurred but the parties did not reach an agreement.

DEMURRER LEGAL STANDARD
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.) The court “treat[s] the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law ….” (Berkley v. Dowds (2007) 152 Cal.App.4th 518, 525.) 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. (Code Civ. Proc., §§ 430.30, 430.70.) 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.)

The general rule is that the plaintiff need only allege ultimate facts, not evidentiary facts. (Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 550.) “All that is required of a plaintiff, as a matter of pleading … is that his complaint set forth the essential facts of the case with reasonable precision and with sufficient particularity to acquaint the defendant with the nature, source and extent of his cause of action.” (Rannard v. Lockheed Aircraft Corp. (1945) 26 Cal.2d 149, 156-157.)

On demurrer, a trial court has an independent duty to “determine whether or not the … complaint alleges facts sufficient to state a cause of action under any legal theory.” (Das v. Bank of America, N.A. (2010) 186 Cal.App.4th 727, 734.) Demurrers do not lie as to only parts of causes of action, where some valid claim is alleged but “must dispose of an entire cause of action to be sustained.” (Poizner v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119.) “Generally it is an abuse of discretion to sustain a demurrer without leave to amend if there is any reasonable possibility that the defect can be cured by amendment.” (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.)

Demurrer – Uncertainty
A special demurrer for uncertainty, CCP section 430.10(f), is disfavored and will only be sustained where the pleading is so bad that defendant cannot reasonably respond—i.e., cannot reasonably determine what issues must be admitted or denied, or what counts or claims are directed against him/her. (Khoury v. Maly’s of Calif., Inc. (1993) 14 Cal.App.4th 612, 616.) Moreover, even if the pleading is somewhat vague, “ambiguities can be clarified under modern discovery procedures.” (Ibid.)

ANALYSIS
First Cause of Action – Violation of Civ. Code § 2923.5
Based on the allegations in ¶¶ 20 and 22, Plaintiff appears to specifically be alleging a violation of Civ. Code § 2923.5(a)(2). “SPS DEFENDANT failed to satisfy the requirements of Civ. Code § 2923.5(a)(2) before recording a Notice of Default, and violated this statute.” (Compl. ¶ 22.)

In particular, Plaintiff alleges, “On March 11, 2022, SPS DEFENDANT recorded a Notice of Default on the Subject Property. PLAINTIFF was staying in his home when the Notice of Default was issued, and received no mail or messages. (Exhibit “D”).” (Compl. ¶ 21.)

Defendant argues that Plaintiff did not allege facts sufficient to constitute a cause of action for violation of Civ. Code § 2923.5.

The Court notes that 2923.5(a)(2) states

A mortgage servicer shall contact the borrower in person or by telephone in order to assess the borrower’s financial situation and explore options for 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(a)(2).)

Defendant argues that the mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent only needs to attempt to contact the borrower in accordance with the “due diligence” efforts outlined in 2923.5(e).)

“A notice of default may be recorded pursuant to Section 2924 when a mortgage servicer has not contacted a borrower as required by paragraph (2) of subdivision (a) provided that the failure to contact the borrower occurred despite the due diligence of the mortgage servicer.” (Civ. Code § 2923.5(e).)

The Court notes that § 2923.5(e)(1)-(5) defines the “due diligence” requirements.

Thus, Defendant’s argument appears to be that the requirements of § 2923.5(a)(2) can be excused when Defendant meets the due diligence requirements of § 2923.5(e)(1)-(5).

Defendant appears to be arguing that based on Exhibit D that is attached to Plaintiff’s Complaint, Defendant met the due diligence requirements.

Exhibit D is the Notice of Default and Election to Sell attached to Plaintiff’s verified complaint. In relevant part of Exhibit D, it states, “On 10/20/2021 the due diligence efforts were satisfied. No contact was made with the borrower despite the due diligence of beneficiary or their authorized agent pursuant to California Civil Code § 2923.55(f).”

Defendant argues that the mere existence of a declaration attesting compliance with Section 2923.5 disposes of Plaintiff’s claim unless there are specific factual allegations to the contrary, and Defendant cites Maguca v. Aurora Loan Services (C.D. Cal. Oct. 28, 2009) No. SACV 09-1086 JVS (ANx), 2009 WL 3467750 to support its argument.

The Court does not find Defendant’s argument availing for several reasons.

First, Plaintiff alleged a violation of § 2923.5(a)(2), and the due diligence exceptions are outlined in § 2923.5(e).

The declaration attached to Exhibit D references complying with the due diligence requirements of § 2923.55(f).

Further, with respect to Defendant’s citation to Maguca, it is non-binding authority. Additionally, Maguca stated, “The fourth cause of action, based upon California Civil Code sections 2923.52 and 2923.53, is self-contradictory because the FAC admits that Aurora and Chase are exempt from the statutes. (FAC ¶ 97.) The Court finds this admission sufficient to dismiss this cause of action.” (Macuga at p. 2.)

Not only was Maguca a federal case, it is not a reported case. Further, it doesn’t deal with § 2923.5(a)(2).

Even if the Court takes judicial notice of Exhibit D, and even if the Court assumed that Defendant complied with the due diligence requirements of § 2923.5(e) so that Defendant does not have to comply with § 2923.5(a)(2), Defendant does not cite any binding case law that Plaintiff had to allege that the § 2923.5(e) due diligence requirements were not met. Or to phrase it differently, Defendant does not come forward with any case law that Plaintiff had to allege both a violation of § 2923.5(a)(2) and that the exceptions to § 2923.5(a)(2) do not apply. Further, Plaintiff argues that regardless of the declaration in the notice of default that Defendant attempted contact, Plaintiff argues none was made. Thus, the Court fails to see how Defendant’s arguments are successful at the pleading stage.

Defendant also cites the following portion of Billesbach v. Specialized Loan Servicing LLC (2021) 63 Cal.App.5th 830, 837 to argue that the allegations establish that Defendant subsequently cured any such violation:

[T]he HBOR creates liability only for material violations that have not been remedied before the foreclosure sale is recorded. A material violation is one that affected the borrower's loan obligations, disrupted the borrower's loan-modification **216 process, or otherwise harmed the borrower. Based on these principles, we hold that where a mortgage servicer's violations stem from its failure to communicate with the borrower before recording a notice of default, the servicer may cure these violations by doing what respondent did here: postponing the foreclosure sale, communicating with the borrower about potential foreclosure alternatives, and fully considering any application by the borrower for a loan modification. Following these corrective measures, any remaining violation relating to the recording of the notice of default is immaterial, and a new notice of default is therefore not required to avoid liability.

(Billesbach v. Specialized Loan Servicing LLC (2021) 63 Cal.App.5th 830, 837.)

Defendant then argues:

According to Plaintiff’s own allegations, Defendant was in communication with Plaintiff after the NOD was recorded. Specifically, Plaintiff alleges that he submitted the RMA to Defendant on January 26, 2024, and again on February 9, 2024, and was thereafter in contact with an SPS representative on January 30, 2024. (Compl, ¶ 15.) These allegations establish that Defendant cured any alleged violation of Civil Code Section 2923.5.

(Dem. p. 7.)

The Court does not find this argument availing.

First, Billesbach was not a pleading case.

Second, the Court fails to understand how Defendant’s arguments relate to the requirements of § 2923.5(a)(2).

TENTATIVE RULING FIRST CAUSE OF ACTION
Defendant’s demurrer to the first cause of action is OVERRULED.

Second Cause of Action – Violation of § 2923.7
“When a borrower 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).)

Under § 2923.7(b), the single point of contact shall be responsible for doing all of the following:

(1) Communicating the process by which a borrower may apply for an available foreclosure prevention alternative and the deadline for any required submissions to be considered for these options.

(2) Coordinating receipt of all documents associated with available foreclosure prevention alternatives and notifying the borrower of any missing documents necessary to complete the application.

(3) Having access to current information and personnel sufficient to timely, accurately, and adequately inform the borrower of the current status of the foreclosure prevention alternative.

(4) Ensuring that a borrower is considered for all foreclosure prevention alternatives offered by, or through, the mortgage servicer, if any.

(5) Having access to individuals with the ability and authority to stop foreclosure proceedings when necessary.

(Civ. Code § 2923.7(b)(1)-(5).)

Plaintiff’s Complaint alleged:

25. On January 26, 2024, PLAINTIFF submitted a Complete Loan Modification Application to SPS DEFENDANT , and requested the appointment of a Single Point of Contact (“SPOC”). (See Exhibit “F”)

26. PLAINTIFF alleges that SPS DEFENDANT failed to assign a “SPOC” within a reasonable time after receipt of the loan modification application.

27. PLAINTIFF continued to rely on the fact that his application was being reviewed.

28. This is a material violation of Civ.Code §2923.7 because in failing to assign a SPOC, the entity has prevented PLAINTIFF’S chances for a successful submission of the proper papers to complete a loan modification package to save the Subject Property from foreclosure, and the resultant loss of equity and a place to live for PLAINTIFF and his dependents.

(Compl. ¶¶ 25-28.)

Defendant argues that it is clear from Plaintiff’s allegation in ¶ 15 of the Complaint, Plaintiff was able to communicate with a specific point of contact at SPS regarding the status of his loan modification application.

Paragraph 15 of the Complaint alleged, “PLAINTIFF alleges that on January 30, 2024, NON-PROFIT called SPS DEFENDANT and spoke to Saphire, who advised that they could not review the file because it was too close to the sale date. It does not comply to the 5 business day which was actually 4 business days.” (Compl. ¶ 15.)

Here, the Court does not understand Defendant’s arguments. Defendant makes no argument as to what must be alleged at the pleading stage, and the Court does not follow what Defendant is trying to argue with respect to the allegations at ¶15 with respect to 2923.7.

Defendant also argues that a violation of 2923.7 is actionable only when that violation is material. Defendant then cites to Gillies v. JPMorgan Chase Bank, N.A. (2017) 7 Cal.App.5th 907 for the proposition that a material violation is one where the alleged violation affected a plaintiff’s loan obligation or the modification process. Defendant then argues that in Gillies the action was dismissed where borrower’s allegations demonstrated that the servicer assigned a customer servicer representative to process the loan modification application.

Again, the Court fails to understand Defendant’s arguments.

Defendant also argues:

Moreover, SPS cannot have materially violated Section 2923.7 when it never had an obligation to consider Plaintiff’s late application to begin with. A mortgage servicer’s obligation to make a written determination on a borrower’s application is only triggered if the “borrower submits a complete application . . . at least five business days before a scheduled foreclosure sale.” (See Civ. Code § 2923.6(c) [emphasis added].) Plaintiff alleges that he submitted a complete loan modification application on January 24, 2024, which was four (4) days prior to the original trustee’s sale date of January 30, 2024). (Compl., ¶ 14 and Ex. D.) SPS, in turn, correctly advised Plaintiff that he had submitted his application to close to the trustee’s sale date. (Compl., ¶ 15.) If SPS did not have an obligation to review a late application under HBOR, then Plaintiff’s alleged violation of Section 2923.7 cannot be material.

Along the same lines, HBOR does not require a loan servicer to provide a loan modification or any other type of foreclosure avoidance option to borrowers. (See Cal. Civ. Code § 2923.4 [“Nothing in the act . . . shall be interpreted to require a particular result of that process.”].) Therefore, the fact that Plaintiff was ultimately found not to qualify for review does not establish a “material” violation.

Accordingly, Plaintiff has failed to allege sufficient facts to state a cause of action for violation of Civil Code § 2923.7.

(Dem. p. 8-9.)

Again, the Court fails to understand Defendant’s argument.

TENTATIVE RULING SECOND CAUSE OF ACTION
The Court will hear argument. The Court tentatively plans to OVERRULE Defendant’s demurrer to the second cause of action because it does not understand the arguments that Defendant is making. Defendant is the one arguing that sufficient facts are not alleged, but Defendant makes no attempt to cite cases as to what must be alleged for this cause of action or present arguments that the Court can understand.

Third Cause of Action – Violation of Civ. Code § 2924.9
The third cause of action alleges:

31. On March 11, 2022, SPS DEFENDANT recorded a Notice of Default on the Subject Property. PLAINTIFF was staying in his home when the Notice of Default was issued, and received no mail or messages. (Exhibit “D”)

32. SPS DEFENDANT failed to notify PLAINTIFF of all foreclosure prevention alternatives within 5 business days after Notice of Default recorded, as required by Civ.Code §2924.9.

33. PLAINTIFF was living in the Subject Property when the Notice of Default was recorded. PLAINTIFF did not receive any phone calls or phone messages, and did not receive any pieces of mail that referred to discussions about alternatives to foreclosure before it was commenced. If PLAINTIFF did receive such contact and communication, they would have taken action to avoid the foreclosure of the Subject Property with other lending sources.

34. PLAINTIFF is entitled to an injunction prior to foreclosure, or civil and statutory penalties post-foreclosure against SPS DEFENDANT in an amount to be proven at trial.

(Compl. ¶¶ 31-34.)

Under Civ. Code § 2924.9:

(a) Unless a borrower has previously exhausted the first lien loan modification process offered by, or through, his or her mortgage servicer described in Section 2923.6, within five business days after recording a notice of default pursuant to Section 2924, a mortgage servicer that offers one or more foreclosure prevention alternatives shall send a written communication to the borrower that includes all of the following information:

(1) That the borrower may be evaluated for a foreclosure prevention alternative or, if applicable, foreclosure prevention alternatives.

(2) Whether an application is required to be submitted by the borrower in order to be considered for a foreclosure prevention alternative.

(3) The means and process by which a borrower may obtain an application for a foreclosure prevention alternative.

(b) This section shall not apply to entities described in subdivision (b) of Section 2924.18.

(Civ. Code § 2924.9.)

Defendant still cites to Billesbach, a case that was not at the pleading stage.

Defendant then argues:

This is still what the allegations and exhibits to Plaintiff’s Complaint establish – that after recordation of the NOD on March 11, 2022, Plaintiff had the opportunity to submit an application, which he did, and the sale was not held, demonstrating that any alleged violation was either cured and/or was not material. (Compl., ¶¶ 13 – 17.)

Moreover, Plaintiff has also failed to state a claim for violation of Civil Code § 2924.9 because he does not allege any additional facts in his Complaint showing that he were prejudiced in such a way that it precluded him from obtaining relief which would have allowed him to avoid foreclosure. Plaintiff has known since March 2022 that he was in default on his Loan. Plaintiff was clearly aware of the means and process to submit an application since he actually submitted an RMA on January 26, 2024. Moreover, Plaintiff’s Complaint arguably implies that the foreclosure sale did not take place on March 3, 2024, and Plaintiff does not allege that any new sale date has been set. (See Compl. generally and Prayer For Relief, ¶ 3.)

Accordingly, Plaintiff has failed to allege sufficient facts to state a cause of action for violation of Civil Code § 2924.9.

(Dem. p. 10.)

Here, the Court continues to fail to understand Defendant’s argument.

TENTATIVE RULING THIRD CAUSE OF ACTION
Defendant’s demurrer to the third cause of action is tentatively OVERRULED. The Court will hear argument.

Fourth Cause of Action – Violation of Civ. Code § 2924.10
Plaintiff alleges:

36. On January 26, 2024, PLAINTIFF submitted a Complete Loan Modification Application to SPS DEFENDANT, and requested the appointment of a Single Point of Contact (“SPOC”). (See Exhibit “F”)

37. SPS DEFENDANT failed to provide written notice to PLAINTIFF of receipt of loan modification application within 5 business days of receipt.

38. The failure to advise PLAINTIFF if his loan modification request was received by DEFENDANTS is a material violation of the statute. This is because it jeopardizes PLAINTIFF’s right to submit a timely loan modification package while a pending foreclosure is in process, which could result in the loss of equity in the Subject Property, and the loss of a place to live for PLAINTIFF and his dependents.

39. PLAINTIFF is entitled to an injunction prior to foreclosure or civil and statutory penalties post-foreclosure against SPS DEFENDANT in an amount to be proven at trial.

(Compl. ¶¶ 36-39.)

Civ. Code § 2924.10 states:

(a) When a borrower submits a complete first lien modification application or any document in connection with a first lien modification application, the mortgage servicer shall provide written acknowledgment of the receipt of the documentation within five business days of receipt. In its initial acknowledgment of receipt of the loan modification application, the mortgage servicer shall include the following information:

(1) A description of the loan modification process, including an estimate of when a decision on the loan modification will be made after a complete application has been submitted by the borrower and the length of time the borrower will have to consider an offer of a loan modification or other foreclosure prevention alternative.

(2) Any deadlines, including deadlines to submit missing documentation, that would affect the processing of a first lien loan modification application.

(3) Any expiration dates for submitted documents.

(4) Any deficiency in the borrower’s first lien loan modification application.

(b) For purposes of this section, a borrower’s first lien loan modification application shall be deemed to be “complete” when a borrower has supplied the mortgage servicer with all documents required by the mortgage servicer within the reasonable timeframes specified by the mortgage servicer.

(d) This section shall apply only to mortgages or deeds of trust described in Section 2924.15.

(Civ. Code § 2924.10(a)-(d).)

TENTATIVE RULING FOURTH CAUSE OF ACTION
The Court will hear argument. The Court continues to not understand several of the arguments that Defendant is attempting to make.

TENTATIVE RULING FIFTH CAUSE OF ACTION
Defendant’s argument about the UCL claim is not entirely clear. It appears that Defendant is arguing that since Plaintiff did not successfully allege violations of the Civil Code, Plaintiff did not allege a violation of the UCL.

“ ‘The “unlawful” practices prohibited by … section 17200 are any practices forbidden by law, be it civil or criminal, federal, state, or municipal, statutory, regulatory, or court-made. [Citation.] It is not necessary that the predicate law provide for private civil enforcement. [Citation.] As our Supreme Court put it, section 17200 “borrows” violations of other laws and treats them as unlawful practices independently actionable under section 17200 et seq.’” (South Bay Chevrolet v. General Motors Acceptance Corp. (1999) 72 Cal.App.4th 861, 880 citing Hewlett v. Squaw Valley Ski Corp. (1997) 54 Cal.App.4th 499, 531-532.) “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; “Demurrer was properly sustained as to this cause of action because the second amended complaint identifies no particular section of the statutory scheme which was violated and fails to describe with any reasonable particularity the facts supporting violation.” (Id.).)

Here, Plaintiff’s Complaint appears to at the very least successfully allege a violation of 2923.5(a)(2). Further, the fifth cause of action references violation of 2923.5.

Defendant’s demurrer to the fifth cause of action is OVERRULED.