Judge Bruce G. Iwasaki, Case Number: 24STCV09252, Date: 2024-11-21 Tentative Ruling

Tentative Ruling: The Demurrer to the First Amended Complaint is overruled as to the first and second cause of action and sustained as to the fourth cause of action.

This is a foreclosure case. The First Amended Complaint alleges causes of action for (1.) Violations of California Civil Code Section 2923.6, (2.) Violations of California Civil Code Section 2923.7, (3.) Violation of California Civil Code Section 2924c, and (4.) Violations of Cal. Business & Professions Code section 17200.

On October 17, 2024, Defendant Bank of America, N.A. filed a demurrer to the First Amended Complaint. Plaintiff Rasheeda Garner filed an opposition.

The request for judicial notice of Exhibit 1 is granted. (Evid. Code, § 452, subd. (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.) In applying these standards, the court liberally construes the complaint to determine whether a cause of action has been stated. (Picton v. Anderson Union High School Dist. (1996) 50 Cal.App.4th 726, 733.)

Defendant demurs to the first and second causes of action in the First Amended Complaint on the grounds of Plaintiff is currently engaged in a Chapter 13 bankruptcy proceeding. (RJN Ex. 1.) As such, she lacks standing to assert a claim for relief under the HBOR.

Civil Code section 2924.12, the statute authorizing a cause of action for violation of sections 2923.6 and 2923.7, applies only to a “borrower.” The definition of a “borrower” under the HBOR excludes an individual who has filed for bankruptcy if “the bankruptcy court has not entered an order closing or dismissing the bankruptcy case, or granting relief from a stay of foreclosure.” (Civ. Code, § 2920.5, subd. (c)(2)(C); see Civ. Code, § 2920.5, subd. (c)(1).)

On April 29, 2024, Plaintiff filed a petition for Chapter 13 bankruptcy protection. (RJN Ex. 1.) The FAC alleges underlying misconduct from March 23, 2023 to April 24, 2024. (FAC ¶¶ 18-33.) Thus, according to the pleadings, Plaintiff was a “borrower” as defined by statute during the all the relevant periods of the HBOR violation.

Contrary to the reply, what is critical to determining a violation of HBOR is whether Plaintiff was a borrower at the time of the alleged violations, not currently. (See Morris v. JPMorgan Chase Bank, N.A. (2022) 78 Cal.App.5th 279, 297-299 [wrongful acts while plaintiff was not in active bankruptcy proceedings did not disqualify plaintiff from being a “borrower”].) Thus, Plaintiff was a “borrower” during the time she alleges that Defendant committed misconduct against her, which was before she filed for bankruptcy protection. She is not subject to Civil Code section 2920.5, subdivision (c)(2)(C).

California Civil Code section 2923.6 prohibits “dual tracking,” whereby a lender proceeds with the foreclosure process while reviewing a loan modification application. (Civ. Code § 2923.6, subd. (c).)

Defendant demurs to this cause of action on the grounds that Plaintiff has failed to state a claim because she has failed to allege facts showing her application for a loan modification was “complete.” Specifically, FAC alleges that Defendant requested additional documentation from Plaintiff on April 5, 2024, which she provided on April 11, 2024. (FAC, ¶ 30.) Plaintiff does not allege that Defendant “record[ed] a notice of default or notice of sale or conduct a trustee’s sale” after April 11, 2024. Based on these allegations, Defendant argues that Plaintiff’s loan modification application was not complete.

Plaintiff argues that this is not the law, citing Mace v. Ocwen Loan Servicing, LLC (N.D. Cal. 2017) 252 F.Supp.3d 941. Mace is persuasive.

In Mace, the court considered almost identical allegations to the allegations alleged by Plaintiff here. The court found such allegations were sufficient to state a claim, explaining:

“The statute defines completeness by when the borrower has supplied the required documents to the mortgage servicer, not when the mortgage servicer completes its review and acknowledges that no further documents are required. The statutory language does not permit a mortgage servicer to create a moving target so borrowers have no way of knowing whether a loan modification application is complete until the mortgage servicer tells them so.” (Id. at 946.)

The court in Mace further explained that “a mortgage servicer must tell the borrowers in advance what documents are required and specify reasonable timeframes for the submission of those documents.” (Id. at 947.) Similarly, the court in Mackovska v. Bank of America, N.A. (C.D. Cal., Apr. 2, 2019, No. CV181666DOCJDEX) 2019 WL 4137609 found the reasoning in Mace persuasive and noted that “Defendant's construction of § 2924.11(f) would allow servicers to evade the HBOR’s prohibition on “dual-[tr]acking,” simply by collecting documents from applicants in a piecemeal manner in order to prevent those applications from becoming complete while the servicer pursues foreclosure proceedings.” (Id. at *4.)

Defendant does not address either of these cases. The allegations allege a material[1] violation of Civil Code section 2923.6. The demurrer on this ground is overruled.

Second Cause of Action for Violations of California Civil Code Section 2923.7:

California Civil Code section 2923.7, subdivision (a), provides that, “[w]hen a borrower requests a foreclosure prevention alternative, the mortgage servicer shall promptly establish a single point of contact.”

Defendant demurs to this cause of action on the grounds that – although Plaintiff claims that Defendant violated section 2923.7 – the FAC fails to allege any of the specific statutory duties under Section 2923.7, subdivision (b), that went unfulfilled.

But the FAC alleges that Defendant violated Section 2923.7, subdivision (b), by failing to provide Plaintiff with a single point of contact (SPOC) who could fulfill all their statutory duties. Specifically, Plaintiff avers that the SPOC failed to coordinate the receipt of all documents associated with available foreclosure prevention alternatives and notify the borrower of any missing documents necessary to complete the application. (FAC ¶¶ 46-47.)

These allegations are sufficient to allege a material violation under Section 2923.7. (See Morris v. JPMorgan Chase Bank, N.A. (2022) 78 Cal.App.5th 279, 302.) The demurrer on this ground is overruled.

Fourth Cause of Action for Violations of Cal. Business & Professions Code section 17200:

“Virtually any state, federal, or local law can serve as the predicate” for a UCL claim. (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1361.) Defendant’s demurrer to Plaintiff's UCL claim is premised, in part, on the failure of Plaintiff's HBOR claim as a predicate. Because the Court overruled Defendant’s demurrer to Plaintiff's HBOR claims, it also overrules Defendant’s demurrer to Plaintiff’s UCL claim on this ground.

However, Business and Professions Code section 17204 restricts private standing to bring a UCL action to “a person who has suffered injury in fact and has lost money or property as a result of the unfair competition.” To satisfy the standing requirement, a plaintiff must “(1) establish a loss or deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury, and (2) show that that economic injury was the result of, i.e., caused by, the unfair business practice or false advertising that is the gravamen of the claim.” (Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 322.)

Here, the FAC fails to allege an economic injury. The only concrete economic injury identified by Plaintiff is her “costs and attorney fees to bring this action” and “incurred penalties and interest on back dues.” (Opp., 12:1-10.)

However, costs and attorney fees are insufficient. (In re Google Inc. Street View Electronic Communications Litigation (N.D. Cal. 2011) 794 F.Supp.2d 1067, 1086 [treating attorney fees as a loss of money or property would “effectively eviscerate the heightened standing requirements”.].) Moreover, no economic injury arises under the UCL merely because interest, penalties, and fees continue to accumulate as a result of Plaintiff’s default. (Shupe v. Nationstar Mortgage LLC (E.D. Cal. 2017) 231 F.Supp.3d 597, 605-606.)

Finally, no foreclosure sale has occurred. Plaintiff still has her home and her money because she does not allege that she tendered the debt. A borrower’s potential loss does not create a UCL claim because “his prospect of losing the home to foreclosure is the result of default, not the alleged conduct of defendants.” (Graham v. Bank of America (2014) 226 Cal.App.4th 594, 614.)

[1] “Material violation” under Section 2923.7 “is one that affected the borrower's loan obligations, disrupted the borrower's loan-modification process, or otherwise harmed the borrower.” (Morris v. JPMorgan Chase Bank, N.A. (2022) 78 Cal.App.5th 279, 304.)

Judge Bruce G. Iwasaki

Department 58