Judge: Barbara M. Scheper, Case: 22STCV16146, Date: 2022-10-04 Tentative Ruling
Case Number: 22STCV16146 Hearing Date: October 4, 2022 Dept: 30
Dept. 30
Calendar No.
Ganier-Maiden,
et. al. vs. SGLC, Inc., et. al.,
Case No. 22STCV16146
Tentative Ruling re:
Defendants’ Demurrer to Complaint; Motion to Strike
Defendants SGLC, Inc., Michael
Goodman, and Del Toro Loan Servicing, Inc. (collectively, Defendants) demur to
the Complaint of Plaintiffs Mitchaelle Ganier-Maiden, individually and as
trustee of the Estate of Ida Ganier Trust (collectively, Plaintiffs). The
demurrer is sustained as to the third, fourth, seventh and ninth causes of
action. The demurrer is overruled as to the first, second, fifth, sixth, and eighth
causes of action. The motion to strike
is granted in part and denied in part.
In reviewing the legal sufficiency of a complaint against a demurrer, a
court will treat the demurrer as admitting all material facts properly pleaded,
but not contentions, deductions, or conclusions of law. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318 (Blank); C & H Foods Co.
v. Hartford Ins. Co. (1984) 163 Cal.App.3d 1055, 1062.) It is well settled
that a “demurrer lies only for defects appearing on the face of the
complaint[.]” (Stevens v. Superior Court
(1999) 75 Cal.App.4th 594, 601.) “The rules by which the sufficiency of a
complaint is tested against a general demurrer are well settled. We not only
treat the demurrer as admitting all material facts properly pleaded, but also
give the complaint a reasonable interpretation, reading it as a whole and its
parts in their context.” (Guclimane Co.
v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 38 (internal quotes
omitted).) For purposes of ruling on a demurrer, the complaint must be
construed liberally by drawing reasonable inferences from the facts pleaded. (Wilner v. Sunset Life Ins. Co. (2000) 78
Cal.App.4th 952, 958.)
When ruling on a demurrer, the Court may only consider the complaint’s
allegations or matters which may be judicially noticed. (Blank, supra, 39 Cal.3d at 318.) The Court may not consider any
other extrinsic evidence or judge the credibility of the allegations plead or the
difficulty a plaintiff may have in proving his allegations. (Ion Equip. Corp. v. Nelson (1980) 110
Cal.App.3d 868, 881.) A demurrer is properly sustained only when the complaint,
liberally construed, fails to state facts sufficient to constitute any cause of
action. (Kramer v. Intuit Inc. (2004)
121 Cal.App.4th 574, 578.)
Since her mother’s passing in
December 2015, Plaintiff Mitchaelle Ganier-Maiden (Maiden) has served as
trustee of the Estate of Ida Ganier (the Trust). (Comp. ¶ 12.) The Trust’s
major asset is the real property located at 2922 W. 77th Street, Inglewood, CA
90305 (the Property). (Comp. ¶ 12.)
In January 2020, Maiden applied for
a refinance loan on the Property from Defendants SGLC, Inc. and Michael Goodman,
in order to pay off a prior loan and make payments due to the Trust
co-beneficiaries, Maiden’s siblings. (Comp. ¶ 15.) Defendant Del Toro Loan
Servicing, Inc. is the servicing agent of SGLC. (Comp. ¶ 21.) Maiden obtained a
loan of $325,000 from SGLC on January 15, 2020, secured by a first deed of
trust against the Property. (Comp. ¶ 17.) However, Defendants failed to approve
the full amount sufficient to pay Maiden’s siblings. (Comp. ¶ 19.)
Maiden’s financial problems
worsened over the next year, and she became unable to make installment payments
to Defendants. (Comp. ¶ 20.) On April 12, 2021, Defendants placed the Property
in foreclosure proceedings and scheduled a trustee sale of the Property for
August 12, 2021. (Comp. ¶ 21.) Maiden’s siblings also instituted a court action
against Maiden to recover a balance due of $50,000. (Comp. ¶ 22.) Maiden filed
for chapter 13 bankruptcy on August 11, 2021, and began a plan to pay
Defendants the amount owed over 60 monthly installments. However, Maiden
defaulted in other obligations to the chapter 13 trustee, causing her
bankruptcy case to be dismissed without prejudice. (Comp. ¶ 24.)
Following
the dismissal of Maiden’s case, on January 12, 2022, SGLC represented to Maiden
through her real estate broker that if Maiden held off from filing another
bankruptcy petition and secured a loan to pay off Defendants, Defendants would
not foreclose on her property and would postpone the foreclosure sale set for
February 22, 2022. (Comp. ¶ 25.) Maiden secured a loan commitment and held off
from filing another bankruptcy petition, but discovered on February 22, 2022,
that the Property had been sold in the foreclosure sale regardless. (Comp. ¶¶
26-27.) The Property was sold to Defendant Hollyvale Rental Holdings, LLC
(Hollyvale) for $566,000, though the fair market value of the Property was
$800,000. (Comp. ¶ 31.)
First Cause of Action to Set Aside Sale
Plaintiffs’
first cause of action seeks to set aside the February 22 sale of the Property
to Hollyvale on the grounds that Defendants “misrepresented facts . . . and by
their conduct in violation of the terms and conditions of the promissory note
and deed of trust and in violation of the duties and obligations of Defendant
beneficiary and Defendant trustee to Plaintiffs, all to Plaintiffs[‘] loss and
damage in that Plaintiff has been wrongly deprived and has been deprived of
legal title by forfeiture.” (Comp. ¶ 50.) Plaintiffs also allege that
Defendants “attempted and purported to sell the trust property without
recording a new postponement and for an unreasonable commercial value to
[Hollyvale].” (Comp. ¶ 48.)
“‘It is the general
rule that courts have power to vacate a foreclosure sale where there has been
fraud in the procurement of the foreclosure decree or where the sale has been
improperly, unfairly or unlawfully conducted, or is tainted by fraud, or where
there has been such a mistake that to allow it to stand would be inequitable to
purchaser and parties.’ [Citation.] A debtor may apply to a court of equity to
set aside a trust deed foreclosure on allegations of unfairness or irregularity
that, coupled with the inadequacy of price obtained at the sale, mean that it
is appropriate to invalidate the sale.” (Lo v. Jensen (2001) 88
Cal.App.4th 1093, 1095.)
“In a suit to set aside the sale, the burden is on the
plaintiff to plead and prove all facts necessary to show the invalidity of the
sale, including that the sale was conducted fraudulently or
irregularly or that the seller departed in some way from the directions of the
trust deed, causing the plaintiff's injury.” (27 Cal. Jur. 3d Deeds of Trust
(2022) § 326.)
Plaintiff has pled sufficient facts to support
a claim for setting aside the sale of the Property on February 22, 2022.
Plaintiff alleges that Defendants fraudulently proceeded with the foreclosure
sale despite representing to Plaintiff that they would postpone the sale if
Plaintiff secured another loan and refrained from filing a bankruptcy petition.
(Comp. ¶ 19.) Though Plaintiff fulfilled these conditions, Defendants still
proceeded with the foreclosure sale. (Comp. ¶¶ 26-27.) Plaintiff further
alleges that Defendants sold the Property to Hollyvale for unreasonable
commercial value, $234,000 below market value. (Comp. ¶¶ 31, 48.) “A debtor may
apply to a court of equity to set aside a trust deed foreclosure on allegations
of unfairness or irregularity that, coupled with the inadequacy of price
obtained at the sale, mean that it is appropriate to invalidate the sale.” (Lo
v. Jensen, supra, 88 Cal.App.4th at 1095.) Plaintiffs’ allegations
that the foreclosure sale was improperly or unfairly conducted, and that the
Property was sold at an unreasonable price are sufficient to state grounds for
setting aside the sale.
Defendants demur on the grounds that SGLC, Inc.
had no duty to approve a larger loan to Plaintiff and that Defendants had no
legal responsibility to publish the postponed foreclosure date of February 22,
2022. These issues are irrelevant here given that the aforementioned
allegations are sufficient to state grounds for setting aside the sale.
Accordingly, the demurrer is overruled as to
the first cause of action.
Second and Third Fraud Causes of Action
Plaintiff’s
second and third causes of action against Defendants are for Fraud and
Constructive Fraud, respectively. Both claims are premised on Defendants’
alleged misrepresentations to Plaintiff that they would not foreclose on the
Property if Plaintiff refrained from filing another bankruptcy petition and
secured a loan to pay off Defendants. (Comp. ¶¶ 56, 64.)
The elements of fraud are:
(1) misrepresentation (false representation, concealment, or nondisclosure);
(2) knowledge of falsity (scienter); (3) intent to defraud or induce reliance;
(4) justifiable reliance; and (5) damages. (See Civil Code §1709.) Fraud
actions are subject to strict requirements of particularity in pleading. (Committee
on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197,
216.) “The particularity requirement demands that a
plaintiff plead facts which show how, when, where, to whom, and by what means
the representations were tendered.” (Cansino v. Bank of America (2014)
224 Cal.App.4th 1462, 1469.)
“Constructive fraud is a unique
species of fraud applicable only to a fiduciary or confidential relationship.”
(Assilzadeh v. California Federal Bank (2000) 82 Cal.App.4th 399, 415.)
Constructive fraud “comprises any act, omission or concealment involving a
breach of legal or equitable duty, trust or confidence which results in damage
to another even though the conduct is not otherwise fraudulent.” (Id.)
“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.’” (Tyler v. Children’s Home Society
(1994) 29 Cal.App.4th 511, 548 (quoting Odorizzi v. Bloomfield School Dist.
(1966) 246 Cal.App.2d 123, 129) (emphasis in original).) “Actual reliance and
causation of injury must be shown.” (Id.)
Here, the
Complaint alleges, “On or about January 12, 2022, following the dismissal of
Ms. Maiden’s [bankruptcy] case, the defendant SGLC, Inc. through its secretary
and Director, Michael Goodman, represented to Ms. Maiden through her real
estate broker, Keith Hale, that if Ms. Maiden holds off from filing a
bankruptcy petition, and secures a loan pay-off [to] the Defendants, the
Defendants would not foreclose on her property, and would postpone the
foreclosure sale set for February 22, 2022.” (Comp. ¶ 25.)
Defendants demur to both claims on
the basis that Plaintiffs have failed to plead Defendants’ intent not to
perform with specificity.
For promissory fraud, the
defendant’s lack of intent to perform the promise “is
sufficiently pled with a general allegation the promise was made without an
intention of performance. (Beckwith v. Dahl (2012) 205 Cal.App.4th 1039,
1060.) “Purely evidentiary matters—usually circumstantial evidence or
admissions showing lack of that intention—should not be pleaded. Hence, the
only necessary averment is the general statement that the promise was made
without the intention to perform it, or that the defendant did not intend to
perform it.” (Ibid. [quoting 5 Witkin, Cal. Procedure (5th ed.
2008) Pleading, § 725, p. 142].)
Here, Plaintiffs allege that
Defendants knew that the representations they made were false, and that
Defendants always intended to sell Plaintiffs’ property notwithstanding their
promises. (Comp. ¶¶ 57-58.) These allegations are sufficient to show intent not
to perform for purposes of pleading.
With
respect to the constructive fraud claim, Defendants argue that they did not owe
any fiduciary duty to Plaintiffs. The Court agrees.
“[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.” (Rufini v. CitiMortgage, Inc. (2014) 227 Cal.App.4th
299, 312.) Here, the allegations do not show that Defendants’ conduct included
anything beyond its conventional role as a mere lender of money, and so
Plaintiff has not pled the existence of a fiduciary duty between Plaintiff and
Defendants.
Accordingly,
the demurrer is overruled as to the second cause of action for fraud, and
sustained as to the third cause of action for constructive fraud.
Fourth Cause of Action for Breach of Duty of Good Faith
and Fair Dealing
Plaintiffs
allege under their fourth cause of action that Defendants breached the implied
covenant of good faith and fair dealing in the refinance agreement with
Plaintiff, by failing to approve the full amount sufficient to pay off the
Trust co-beneficiaries and by their misrepresentations regarding postponement
of the February 22 foreclosure sale. (Comp. ¶¶ 71-75; Ex. B [24].)
The elements for breach of the
implied covenant of good faith and fair dealing are: (1) existence of a
contract between plaintiff and defendant; (2) plaintiff performed his
contractual obligations or was excused from performing them; (3) the conditions
requiring defendant’s performance had occurred; (4) the defendant unfairly
interfered with the plaintiff’s right to receive the benefits of the contract;
and (5) the plaintiff was harmed by the defendant’s conduct. (Merced Irr. Dist.
V. County of Mariposa (E.D. Cal. 2013) 941 F.Supp.2d 1237, 1280 [discussing
California law].)
“The covenant of good
faith and fair dealing, implied by law in every contract, exists merely to
prevent one contracting party from unfairly frustrating the other party’s right
to receive the benefits of the agreement actually made. The covenant thus
cannot ‘be endowed with an existence independent of its contractual
underpinnings.’ It cannot impose substantive duties or limits on the
contracting parties beyond those incorporated in the specific terms of their
agreement.” (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317,
349-350.) “If there exists a contractual relationship between the parties . . .
the implied covenant is limited to assuring compliance with the express terms
of the contract, and cannot be extended to create obligations not contemplated
in the contract.” (Racine & Laramie, Ltd. v. Department of Parks &
Recreation (1992) 11 Cal.App.4th 1026, 1032.)
This cause of action fails because
there are no allegations showing that Defendants unfairly interfered with
Plaintiffs’ right to receive the benefits of the contract. Plaintiffs’
allegation that Defendants “failed to approve the full amount sufficient to pay
off the siblings to Ms. Maiden” does not show any interference with Plaintiffs’
rights under the refinancing agreement. (Comp. ¶ 73) Defendants’ alleged
misrepresentations also do not state a claim for breach of implied covenant, given
that they were made separate from the contract; the implied covenant of good
faith “cannot be extended to create obligations not
contemplated in the contract.” (Racine & Laramie, Ltd., supra,
11 Cal.App.4th at 1032.)
Accordingly, the demurrer is
sustained as to the fourth cause of action.
Fifth Cause of Action for Promissory Estoppel
“The elements of promissory estoppel are (1) a promise, (2)
the promisor should reasonably expect the promise to induce action or
forbearance on the part of the promisee or a third person, (3) the promise
induces action or forbearance by the promisee or a third person (which we refer
to as detrimental reliance), and (4) injustice can be avoided only by
enforcement of the promise.” (West v. JPMorgan Chase Bank, N.A.
(2013) 214 Cal.App.4th 780, 803.) “The party claiming estoppel must
specifically plead all facts relied on to establish its elements.” (Smith
v. City and County of San Francisco (1990) 225 Cal.App.3d 38, 48.)
Plaintiffs
have sufficiently pled a cause of action for promissory estoppel. Defendants
promised Plaintiffs that they would postpone the foreclosure sale if Plaintiff
would not file another bankruptcy petition and secure a loan to pay Defendants.
(Comp. ¶ 87.) In reasonable reliance on the promise, Plaintiffs proceeded to
secure a loan and to forbear from filing another petition. (Comp. ¶ 88.)
However, Defendants proceeded with the foreclosure sale regardless. (Comp ¶
90.)
Defendants
appear to demur on the basis that they did not have any duty to approve a
larger loan to Plaintiffs. The argument is irrelevant given that Plaintiff has
stated a cause of action for promissory estoppel based on Defendants’ alleged
promise to postpone the foreclosure sale.
Accordingly,
the demurrer is overruled as to the fifth cause of action.
Sixth Cause of Action for Quiet Title
Plaintiffs
allege under the sixth cause of action that the February 22 foreclosure sale is
void “since it failed to comply with the requirements of service, posting,
publication and recordation of the sale notice in accordance with the provisions
of California Civil Code section 2924, et seq. Thus, Defendant Hollyvale Rental
Holdings, LLC is not a bona fide purchaser” (Comp. ¶ 97.)
Under Civ.
Code § 2924f, before any sale of property can be made under the power of sale
contained in any deed of trust or mortgage, “notice of the sale thereof shall
be given by posting a written notice of the time of sale and of the street
address and the specific place at the street address where the sale will be
held, and describing the property to be sold, at least 20 days before the date
of sale in one public place in the city where the property is to be sold.”
(Civ. Code § 2924f, subd. (b)(1).)
Sale
proceedings may be postponed “at any time prior to the completion of the sale
for any period of time not to exceed a total of 365 days from the date set
forth in the notice of sale.” (Civ. Code § 2924g, subd. (c)(1).) Reasons for
postponement include when the sale is stayed by operation of law, such as when
the borrower files for bankruptcy. (In re Nghiem (B.A.P. 9th Cir. 2001)
264 B.R. 557, 561.) “The notice of each postponement and the reason therefor
shall be given by public declaration by the trustee at the time and place last
appointed for sale. A public declaration of postponement shall also set forth the
new date, time, and place of sale and the place of sale shall be the same place
as originally fixed by the trustee for the sale. No other notice of
postponement need be given.” (Civ. Code § 2924g, subd. (d).)
Here, on
July 14, 2021, Defendants allegedly published public notice of the sale of the
Property scheduled for August 12, 2021. (Comp. ¶ 45.) Defendants then postponed
the sale seven times, the first postponement being from August 12 to August 26,
and the last postponement from December 21, 2021, to February 22, 2022. (Comp.
¶ 46.) Plaintiff further alleges that Defendants did not record a new
postponement before proceeding with the February 22 sale. (Comp. ¶ 48.)
Defendants
argue that no further publication was required because the sale was postponed
as a result of Plaintiff filing for bankruptcy on August 11, 2021. However, the
fact that a sale is postponed by operation of law does not negate the notice
requirement. The statute states plainly that “[t]he notice of each postponement
and the reason therefor shall be given by public declaration by the trustee at
the time and place last appointed for sale.” (Civ. Code, § 2924g, subd. (d).)
The provision that “[n]o other notice of postponement need be given” does not,
as Defendants argue, refer to the initial notice of sale under Civ. Code §
2924f, as that initial notice is not a “notice of postponement.” (See United
States Cold Storage v. Great Western Savings & Loan Assn. (1985) 165
Cal.App.3d 1214, 1228 [“Defendants publicly declared the new time and place of
the sale when each postponement took place. They fulfilled all statutory notice
requirements.”].)
Accordingly,
the demurrer is overruled as to the sixth cause of action.
Seventh Cause of Action for Accounting
A cause of action for an accounting
requires a showing that a relationship exists between the plaintiff and
defendant that requires an accounting and that some balance is due to the
plaintiff that can only be ascertained by an accounting. (Teselle v.
McLoughlin (2009) 173 Cal.App.4th 156, 179.)
Plaintiffs
allege under their cause of action for accounting that “[t]he amount of money
still owed to [sic] Defendants SGLC, Inc., Michael Goodman and Del Toro Loaning
Servicing, Inc. is unknown to Plaintiff and cannot be determined without an
accounting.” (Comp. ¶ 103.) Plaintiffs have not specified any alleged basis for
an accounting, and the facts pled do not show the existence of any balance due
to Plaintiff that can only be ascertained by an accounting.
Accordingly,
the demurrer is sustained as to the seventh cause of action.
Eighth Cause of Action for Declaratory Relief
“Any
person interested under a written instrument, excluding a will or a trust, or
under a contract, or who desires a declaration of his or her rights or duties
with respect to another, or in . . . property . . . may, in cases of actual
controversy relating to the legal rights and duties of the respective parties,
bring an original action or cross-complaint in the superior court for a
declaration of his or her rights and duties in the premises, including a
determination of any question of construction or validity arising under the
instrument or contract.” (Code Civ. Proc. § 1060.)
Plaintiffs’
eighth cause of action seeks “a declaratory judgment regarding each of
Plaintiffs contentions set forth in the above causes of action. A declaratory
judgment determining that [Hollyvale’s] Trustee Deed Upon sale is void as set
forth above, and an accounting be ordered and Plaintiff be ordered to tender
payment to the Defendants, SGLC, Inc.” (Comp. ¶ 109.) Plaintiffs are entitled
to a declaratory judgment as to the validity of the Trustee Deed conveyed to
Hollyvale through the February 22 sale.
Accordingly, the demurrer is overruled
as to the eighth cause of action.
Ninth Cause of Action for Injunctive Relief
Plaintiffs’
ninth cause of action for injunctive relief seeks to enjoin Defendants’
unspecified “wrongful conduct.” (Comp. ¶ 114.)
Injunctive
relief is a remedy and not a cause of action.
Plaintiffs may be entitled to injunctive relief related to other causes
of action but this claim, which is vague, and requests monetary relief is not
proper. Accordingly, the demurrer is sustained
as to this claim.
In sum, the demurrer is sustained
as to the third, fourth, seventh and ninth causes of action, and overruled as
to the first, second, fifth, sixth, and eighth causes of action.
Motion to Strike
Defendants
first move to strike Plaintiffs’ allegations referring to Hollyvale as SGLC’s
“cronies,” arguing that the word is irrelevant and inflammatory. (Comp. ¶¶ 28,
58, 76.) It appears that the term is meant to convey that SGLC and Hollyvale
worked together to achieve the alleged fraud. However, this term is conclusory
and not based on any alleged facts. Accordingly,
the Court orders it stricken.
Defendants
next move to strike Plaintiffs’ allegations relating to punitive damages under
their cause of action for fraud. (Comp. ¶ 61, Prayer (f).)
A plaintiff may recover punitive
damages in an action for the breach of an
obligation not arising out of contract where the defendant has been guilty of
oppression, fraud, or malice. (Civ. Code, § 3294, subd. (a).) To succeed on a motion to strike punitive damages, it must
be said as a matter of law that the alleged behavior was not so vile, base, or
contemptible that it would not be looked down upon and despised by ordinary
decent people. (Angie M. v. Superior Court (1995) 37 Cal.App.4th
1217, 1228-29.) “In order to survive a motion to strike an allegation of
punitive damages, the ultimate facts showing an entitlement to such relief must
be pled by a plaintiff.” (Clauson v. Superior Court (1998) 67 Cal.
App. 4th 1253, 1255.)
Plaintiffs’ allegations that Defendants
fraudulently represented to Plaintiff that they would halt the foreclosure sale
given Plaintiffs’ performance of certain conditions are sufficient to plead
grounds for recovery of punitive damages. Accordingly, the motion to strike is
denied as to the punitive damages allegations.