Judge Bruce G. Iwasaki, Case Number: 22STCV25859, Date: 2024-03-20 Tentative Ruling

Moving Party: Defendants Select Portfolio Servicing, Inc., Deutsche Bank National Trust Company, as Trustee, On Behalf of the Holders of WAMU Mortgage Pass-Through Certificates, Series 2005- AR11, and National Default Servicing Corporation

This is a wrongful foreclosure action regarding real property located at 24756 Eilat Street, Woodland Hills, California (Property). The First Amended Complaint (FAC) alleges causes of action for (1.) wrongful foreclosure, (2.) violations of HBOR, (3.) cancellation of deed, (4.) fraud, (5.) negligent misrepresentation, (6.) financial elder abuse, and (7.) unfair business practices.

On November 17, 2022, Defendants Select Portfolio Servicing, Inc., Deutsche Bank National Trust Company, as Trustee, On Behalf of the Holders of WAMU Mortgage Pass-Through Certificates, Series 2005- AR11, and National Default Servicing Corporation (Defendants) demurred to all causes of action in the FAC. Defendants also filed a motion to strike. Plaintiff Robert Zuckerman (Plaintiff ) opposed the demurrer and motion to strike.

The demurrer to the First Amended Complaint is sustained in its entirety. The motion to strike is moot.

Defendants’ request for judicial notice of Exhibits 1-22 is granted. (Evid. Code, § 452, subd. (c), (d).)

A demurrer is an objection to a pleading, the grounds for which are apparent from either the face of the complaint or a matter of which the court may take judicial notice. (Code Civ. Proc., § 430.30, subd. (a); see also Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) The purpose of a demurrer is to challenge the sufficiency of a pleading “by raising questions of law.” (Postley v. Harvey (1984) 153 Cal.App.3d 280, 286.) “In the construction of a pleading, for the purpose of determining its effect, its allegations must be liberally construed, with a view to substantial justice between the parties.” (Code Civ. Proc., § 452.) 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.)

Defendants demur to the First Amended Complaint on the grounds that the pleadings are barred by judicial estoppel, and Plaintiff has failed to state a claim.

Defendants first argue that Plaintiff has failed to state a claim for wrongful foreclosure because Plaintiff has not adequately alleged tender.

“The basic elements of a tort cause of action for wrongful foreclosure track the elements of an equitable cause of action to set aside a foreclosure sale. They 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.)

“A valid and viable tender of payment of the indebtedness owing is essential to an action to cancel a voidable sale under a deed of trust.” (Karlsen v. American Sav. & Loan Assn. (1971) 15 Cal.App.3d 112, 117.) That is, the tender requirement applies to “any cause of action for irregularity in the sale procedure,” including wrongful foreclosure, quiet title, rescission, and declaratory relief. (Abdallah v. United Savings Bank (1996) 43 Cal.App.4th 1101, 1109; see McElroy v. Chase Manhattan Mortgage Corp. (2005) 134 Cal.App.4th 388, 394.) Moreover, “[i]t is well settled in California that a mortgagor cannot quiet his title against the mortgagee without paying the debt secured.” (Shimpones v. Stickney (1934) 219 Cal. 637, 649; see Aguilar v. Bocci (1974) 39 Cal.App.3d 475, 477-478 [mortgagor “cannot clear his title without satisfying his debt”].)

On or about April 27, 2005, Plaintiff, executed a promissory note in the principal amount of $1,400,000 (Note) and granted a Deed of Trust (Deed of Trust) in favor of Washington Mutual Bank. (FAC ¶ 11.) The Note and Deed of Trust were eventually assigned to Defendant Deutsche Bank, who became the Beneficiary under the Deed of Trust. (FAC ¶ 12.) On November 15, 2017, a Notice of Default was recorded against the Property. (FAC ¶ 13.)

The FAC alleges that on March 16, 2022, Plaintiff authorized an attorney named Scott Souder to negotiate on behalf of his client, Transcoast Financial, Inc., to “purchase of the Note for cash to avoid foreclosure.” (FAC ¶ 25.)

In support of his tender allegations, Plaintiff relies on allegations that that this new potential lender, Transcoast Financial, Inc., offered $50,000 to postpone the sale, (FAC ¶¶ 2(c)(ix), 49) or that Plaintiff “would have been ready, willing, and able” to tender the amount due (FAC ¶ 34).

These allegations are insufficient to allege tender, which requires unconditional offer to tender all amounts due by the borrower. (Arnolds Mgmt. Corp. v. Eischen (1985) 158 Cal.App.3d 575, 580 (“[a] tender must be one of full performance and must be unconditional to be valid”); Onofrio v. Rice (1997) 55 Cal.App.4th 413, 424 [the borrower must pay, or offer to pay, the secured debt, or at least all of the delinquencies and costs due for redemption, before commencing the action]; Mack v. Golino (1950) 95 Cal.App.2d 731, 735 [finding tender was not made where plaintiff alleged she was “still ready, willing and able to perform said restitution”].)

In opposition, Plaintiff argues he is entitled to the benefit of the “unfairness” exception to the tender rule because he was told the foreclosure sale was postponed.

It is true that “a tender may not be required where it would be inequitable to impose such a condition on the party challenging the sale.” (Lona v. Citibank, N.A. (2011) 202 Cal.App.4th 89, 113.) For example, in Humboldt Savings Bank v. McCleverty (1911) 161 Cal. 285, the defendant’s deceased husband borrowed $55,300 from the plaintiff bank secured by two pieces of property. The defendant had a $5,000 homestead on one of the properties. (Id. at p. 287.) When the defendant’s husband defaulted on the debt, the bank foreclosed on both properties. In response to the bank’s argument that the defendant had to tender the entire debt as a condition precedent to having the sale set aside, the court held that it would be inequitable to require the defendant to “pay, or offer to pay, a debt of $57,000, for which she is in no way liable” to attack the sale of her $5,000 homestead. (Id. at p. 291.)

Plaintiff further argues Defendants’ oral promise/representation to postpone the foreclosure sale is both an enforceable promise and actionable. (FAC ¶¶ 27-28.)

Plaintiff’s reliance on Defendants’ alleged promise of postponement fails to excuse the tender requirement or otherwise constitute consideration or promissory/equitable estoppel .

Specifically, in the foreclosure context, courts have held “[a]s a general rule, a gratuitous oral promise to postpone a foreclosure sale or to allow a borrower to delay monthly mortgage payments is unenforceable.” (Garcia v. World Savings, FSB (2010) 183 Cal.App.4th 1031, 1039; Raedeke v. Gibraltar Sav. & Loan Ass’n. (1974) 10 Cal.3d 665; Nguyen v. Calhoun (2003) 105 Cal.App.4th 428, 438-440.)

Plaintiff’s opposition notes that in the cases cited by Defendant, the courts found that the exception to this general rule applied. For example, in Raedeke, the court determined that there was consideration arising from “Plaintiffs’ alleged procurement of a responsible, prospective purchaser at Gibraltar’s request would constitute good consideration for Gibraltar’s promise, since such procurement was not originally part of the bargain between plaintiffs and Gibraltar, and constituted both detriment to plaintiffs (through the expenditure of time and energy negotiating with possible purchasers) and benefit to Gibraltar (through the potential substitution of a solvent purchaser in place of plaintiffs, rendering foreclosure unnecessary). Such detriment and benefit each would constitute ‘good consideration for a promise’ in this state.” (Raedeke v. Gibraltar Sav. & Loan Assn., supra, 10 Cal.3d at 673.)

Here, however, the FAC – in contrast to the allegations in Raedeke – does not allege postponement based on any purported agreement from this new alleged seller. (FAC ¶¶ 26-28.) In fact, the allegations, all based on information and belief, are unclear as to which party the email offer was even sent, and do not allege any acceptance of this offer by any party. (FAC ¶ 26.)

Plaintiff further claims that “just like in Raedeke and Nguyen, Plaintiff, procured at his own expense and to his own detriment and for Defendants’ benefit, third party Transcoast Financial to serve as a “potential substitution of a solvent purchaser in place of plaintiffs, rendering foreclosure unnecessary.”” (Opp. 8:14-17.) However, the allegations do not show that the detriment occurred in reliance by any promise by Defendants. Rather, Plaintiff alleges he incurred this detriment and then Defendants allegedly promised to postpone the sale. Plaintiff has also not alleged facts showing promissory estoppel (Raedeke v. Gibraltar Sav. & Loan Assn., supra, 10 Cal.3d at p. 672, fn. 1 [“ ‘Under [the doctrine of promissory estoppel,] a promisor is bound when he should reasonably expect a substantial change of position, either by act or forbearance, in reliance on his promise, if injustice can be avoided only by its enforcement. [Citations.]’ [Citation.]”].)

Finally, Defendants argue that Plaintiff has not alleged “defendants caused an illegal, fraudulent, or willfully oppressive sale of the property pursuant to a power of sale in a mortgage or deed of trust.” (Chavez v. Indymac Mortgage Services (2013) 219 Cal.App.4th 1052, 1062.) That is, to the extent Plaintiff relies on purported violations of the Homeowners Bill of Rights (HBOR), these allegations cannot support an equitable claim overturning a foreclosure sale, as the only remedy available for these statutory violations where the Property has sold is damages. (See Civ. Code, § 2924.12(b) [“After a trustee's deed upon sale has been recorded, a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall be liable to a borrower for actual economic damages…”]; see also Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 905 [stating, under the HBOR, “those facing foreclosure may seek an injunction, while those who have lost their homes may seek treble actual damages or statutory damages of $50,000.”].) Thus, these statutory violations cannot support an equitable cause of action to set aside a foreclosure sale.

In a shotgun approach, Plaintiff alleges violations of Civil Code sections 2923.4, 2923.6 and 2924.11, 2923.55, 2924.9, and 2924.10.

“Defendants have violated the letter and purpose of various statutory provisions of the “Homeowners Bill of Rights,” including but not limited to, Cal. Civ. Code §§ 2923.4 (failure to “ensure that, as part of the nonjudicial foreclosure process, borrowers are considered for, and have a meaningful opportunity to obtain, available loss mitigation options, . . . such as loan modifications or other alternatives to foreclosure”), 2923.6 and 2924.11 (failure to pause the foreclosure process while making loan modification decision and providing adequate time and ability to appeal a denial of a loan modification request), 2923.55 and 2924.9 (failure to properly and timely notify Plaintiff of loss mitigation options), and 2924.10 (failure to timely and adequately notify Plaintiff regarding status and deadlines for his loan modification application).” (FAC ¶ 38.)

As the demurrer argues, Plaintiff was required to plead specific facts to support these statutory violations. (See Fisher v. San Pedro Peninsula Hospital (1989) 214 Cal.App.3d 590, 604 [applying “the general rule that facts in support of each of the requirements of a statute upon which a cause of action is based must be specifically pled”].)

Here, Plaintiff does nothing more than restate the statutory language itself. Further, the reply points to specific defects in the pleadings as it relates to specific statutory violations (Reply 5:11-8:11); while these arguments are well taken, the Court need not rely on this level of analysis where the allegations are entirely conclusory. (FAC ¶¶ 2, 11-30.)

Fourth Cause of Action for Fraud and the Fifth Cause of Action for Negligent Misrepresentation:

The elements of intentional misrepresentation “are (1) a misrepresentation, (2) knowledge of falsity, (3) intent to induce reliance, (4) actual and justifiable reliance, and (5) resulting damage.” (Chapman v. Skype Inc. (2013) 220 Cal.App.4th 217, 230–231.)

On demurrer, Defendants argue that Plaintiff’s fraud allegations are insufficient to state a claim and not pled with the request specificity.

Here, the FAC alleges Plaintiff was orally informed that the trustee’s sale would be postponed, and Plaintiff justifiably relied on this representation. (FAC ¶¶ 47-53.)

As a preliminary matter, the FAC does not even allege the conclusory elements of a fraud cause of action and fails to allege any knowledge of falsity or intent to deceive.

Moreover, the elements of fraud are not alleged with the requisite specificity. Generally, “[i]n California, fraud must be pled specifically; general and conclusory allegations do not suffice.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) “This particularity requirement necessitates pleading facts which show how, where, to whom, and by what means” the alleged fraud occurred. (Id.) [1] The purpose of the particularity requirement is to “separate meritorious and nonmeritorious cases, if possible in advance of trial.” (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.)

Plaintiff fails to plead with specificity the element of detrimental reliance. For example, in Glaski v. Bank of America (2013) 218 Cal.App.4th 1079, the plaintiff alleged he detrimentally relied on forged documents and lost his home as a result. (Id. at p. 1091.) The court determined this allegation was “insufficient under the rules of law that require fraud to be pled specifically” because it “is a general allegation of reliance and damage. It does not identify the particular acts [the plaintiff] took because of the alleged forgeries. Similarly, it does not identify any acts that [the plaintiff] did not take because of his reliance on the alleged forgeries.” (Ibid.)

Further, the negligent misrepresentation claim merely repeats the allegations underlying the fraud cause of action. (FAC ¶¶ 56-60.)

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. (West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 792.) “Under California law, negligent misrepresentation is a species of actual fraud and a form of deceit.” (Wong v. Stoler (2015) 237 Cal.App.4th 1375, 1388.)

Thus, the FAC’s failure specifically to allege detrimental reliance also renders the negligent misrepresentation claim deficient. Further, under both the fraud claim and the negligent representation claim, there are no allegations showing resulting damages. That is, “[t]o the extent plaintiff was damaged, it was by the foreclosure sale itself, not by any representation about the sale being postponed.” (Majd v. Bank of America, N.A. (2015) 243 Cal.App.4th 1293, 1308.)

The Elder Abuse Act makes certain enhanced remedies available to a plaintiff who proves abuse of a person who is an elder (age 65 or older) or dependent adult. (Welf. & Inst. Code, § 15610.27.) Financial abuse occurs when a person or entity “[t]akes, 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.” (Welf. & Inst. Code, § 15610.30, subd. (a)(1).) Such a claim must be alleged with particularity. (Covenant Care, Inc. v. Superior Court (2004) 32 Cal.4th 771, 790.) In addition, the “plaintiff must demonstrate by clear and convincing evidence that defendant is guilty of something more than mere negligence; he or she must show reckless, oppressive, fraudulent, or malicious conduct.” (Delaney v. Baker (1999) 20 Cal.4th 23, 31.)

A taking is for a “wrongful use” when a party “knew or should have known that [its] conduct is likely to be harmful to the elder ... adult.” (Welf. & Inst. Code, § 15610.30, subd. (b).) “Undue influence consists: [¶] 1. In the use, by one in whom a confidence is reposed by another, or who holds a real or apparent authority over him, of such confidence or authority for the purpose of obtaining an unfair advantage over him; [¶] 2. In taking an unfair advantage of another's weakness of mind; or, [¶] 3. In taking a grossly oppressive and unfair advantage of another's necessities or distress.” (Civ. Code, § 1575.)

In Stebley v. Litton Loan Servicing, LLP (2011) 202 Cal.App.4th 522, plaintiffs alleged that the lender violated Civil Code section 2923.5 by filing a notice of default without fully and fairly exploring alternatives to foreclosure. In ruling on the lender’s demurrer, the court held that plaintiff’s allegation was insufficient to support a claim for wrongful foreclosure and that, absent an allegation of wrongful foreclosure, plaintiffs could not allege a cause of action for financial elder abuse. (Id. at pp. 525–526, 528.) The court explained, “Plaintiffs correctly point out that bad faith or intent to defraud is no longer required in elder or dependent adult abuse cases. [Citation.] But they still must allege at least a ‘wrongful use’ of property. [Citation.] As we held in an analogous case, ‘It is simply not tortious for a commercial lender to lend money, take collateral, or to foreclose on collateral when a debt is not paid.... [A] commercial lender is privileged to pursue its own economic interests and may properly assert its contractual rights.’ ” (Id. at pp. 527–528.)

For the reasons addressed in Stebley, the elder abuse claim also fails: Plaintiff has failed to allege a taking for a wrongful use where the claims underlying this cause of action – wrongful foreclosure and fraud – also fail.

“To prevail on a claim to cancel an instrument, a plaintiff must prove (1) the instrument is void or voidable due to, for example, fraud; and (2) there is a reasonable apprehension of serious injury including pecuniary loss or the prejudicial alteration of one’s position.” (U.S. Bank National Assn. v. Naifeh (2016) 1 Cal.App.5th 767, 778.)

Here, Plaintiff’s cancellation of deed claim is entirely derivative of the defective wrongful foreclosure cause of action. (FAC ¶ 43 [“However, by virtue of their wrongful foreclosure alleged above, Defendants’ claims are without any right and Defendants do not have any right, title or interest in the Property.”].)

Thus, this claim fails for the same reasons as the wrongful foreclosure claim. The demurrer to this cause of action is sustained.

The UCL defines unfair competition as “any unlawful, unfair, or fraudulent business act or practice.” (Bus. & Prof. Code § 17200.) A business practice need only satisfy one of the three criteria—unlawful, unfair, or fraudulent—to be considered unfair competition. (McKell v. Wash. Mut., Inc. (2006) 142 Cal.App.4th 1457, 1470-1471.)

Here, the FAC alleges a violation of Business and Professions Code section 17200 on the grounds that Defendants “engaged in unfair business practices in violation of sections 17200, et seq. of the California Business and Professions Code” “[b]y wrongfully foreclosing against Plaintiff’s Property, as alleged above, in violation of provisions of the Homeowners Bill of Rights (Cal. Civ. Code §§ 2923.4, 2923.55, 2924.9, 2924.10, 2923.6, and 2924.11) and financial elder abuse in violation of the Elder Abuse and Dependent Adult Civil Protection Act (Cal. Welf. & Inst. Code §§ 15610.30 and 15657.5)[.]” (FAC ¶ 67.)

This claim is entirely derivative of Plaintiff’s other substantive causes of action, and thus “stand or fall depending on the fate of the antecedent substantive causes of action.” (Krantz v. BT Visual Images (2001) 89 Cal.App.4th 164, 178; Aleksick v. 7-Eleven, Inc. (2012) 205 Cal.App.4th 1176, 1185.)

“The court may, upon a motion made pursuant to Section 435, or at any time in its discretion, and upon terms it deems proper: (a) Strike out any irrelevant, false, or improper matter inserted in any pleading. (b) Strike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court.”¿(Code Civ. Proc., § 436.) “Immaterial” or “irrelevant” matters include allegations not essential to the claim, allegations neither pertinent to nor supported by an otherwise sufficient claim or a demand for judgment requesting relief not supported by the allegations of the complaint. (Code Civ. Proc., § 431.10, subds. (b)(1)-(3).)

The Demurrer to the First Amended Complaint is sustained in its entirety. The motion to strike is moot. Plaintiff shall have leave to amend. An amended complaint shall be filed and served by April 22, 2024.

[1] The pleadings here go beyond mere failure to allege who made the alleged misrepresentations. In the foreclosure context, the court in Miles v. Deutsche Bank National Trust Co. (2015) 236 Cal.App.4th 394 found that the “primary omission in the allegations is that plaintiff does not identify the names of the people he spoke to nor their authority to speak. In our view, this omission falls comfortably in the realm of information that lies more in the possession of defendants.” (Id. at 403–404 [citing Boschma v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 248 [“ ‘While the precise identities of the employees responsible ... are not specified in the loan instrument, defendants possess the superior knowledge of who was responsible for crafting these loan documents’ ”]].)

[2] Defendants also argue that Plaintiff is judicially estopped from raising these claims which were not raised in Plaintiff’s bankruptcy action. This argument is undeveloped as to any specific cause of action and unpersuasive. Specifically, as argued in opposition, the FAC does not demonstrate that Plaintiff’s claim had accrued or that he was aware of the claims he held at the time of the bankruptcy discharge on January 28, 2022. (RJN Ex. 16.)