Judge Cherol J. Nellon, Case Number: 23STCV13708, Date: 2025-03-13 Tentative Ruling

Judge: Cherol J. Nellon, Case: 23STCV13708, Date: 2025-03-13 Tentative Ruling

Case Number: 23STCV13708 Hearing Date: March 13, 2025 Dept: 14

Case Background

Plaintiffs allege that Defendants are wrongfully attempting to foreclose on their home.

On June 14, 2023 Plaintiffs filed their verified Complaint for (1) Declaratory Relief, (2) Breach of the Implied Covenant, (3) Fraud, (4) Abuse of Process, (5) Quiet Title, (6) Negligence, (7) Unfair Competition, and (8) Breach of Contract against Defendants Deutsche Bank National Trust Company (“Deutsche Bank”), Carrington Mortgage Services, LLC (“Carrington”), and DOES 1-50.

On July 24, 2023, Defendants Deutsche Bank and Carrington filed their joint Answer

On April 10, 2024, the Court sustained Defendants’ motion for judgment on the pleadings with leave to amend.

On June 14, 2024, Plaintiffs filed a First Amended Complaint.

On July 24, 2024, the Court sustained Defendants’ second demurrer.

On October 15, 2024, Plaintiffs filed a Second Amended Complaint (SAC).

On October 24, 2024, Defendants filed a third demurrer.

On December 9, 2024, Plaintiffs filed a late opposition to Defendants’ demurrer.

On January 3, 2025, Defendants filed a reply.

Instant Pleading

Defendants demur to Plaintiffs’ SAC on the grounds that it fails to state a cause of action against them.

Decision

The demurrer is SUSTAINED without leave to amend.

Judicial Notice

Defendants request judicial notice of documents related to the subject foreclosure sale, the FAC, and various court records. The requests are GRANTED.

Discussion

Defendants demur to Plaintiffs’ SAC.

Claims by Nicholas D. Folke

The Court previously sustained Defendants’ motion for judgment on the pleadings on the grounds that Nicholas Folke lacked standing because he was not party to any contract or in a position to rely on any fraud or owed any duty by the lenders. The Court then sustained Defendants’ first demurrer for the same reasons. Now, the SAC does not change Nicholas Folke’s claims against Defendants or add any additional facts which would show Nicholas Folke had standing. Therefore, the demurrer is sustained for the same reasons as Defendants’ earlier motion for judgment on the pleadings and demurrer without leave to amend.

Organization

The Court previously sustained Defendants’ motion for judgment on the pleadings and demurrer on the grounds that the Complaint improperly combined causes of action or pled causes of action which did not exist. The Court previously sustained Defendants’ demurrer to the first, third, fourth, and fifth causes of action because they improperly combined different legal theories with improper elements. Now, the SAC continues to suffer from the same organizational defects as the Complaint and the FAC. Therefore, the demurrer is again sustained as to the first, third, fourth, and fifth causes of action.

As before, the Court will also consider Defendants’ other arguments.

Scope of Leave to Amend

The Court previously sustained Defendants’ earlier demurrer as to the FAC’s causes of action for wrongful foreclosure, cancellation of instruments, and unjust enrichment because the Court did not give Plaintiffs leave to add additional causes of action.

A plaintiff may amend a complaint only as authorized by a court’s order sustaining the demurrer with leave to amend and may not add a new cause of action without the court’s permission. (Harris v. Wachovia Mortgage, FSB (2010) 185 Cal.App.4th 1018, 1023.)

Here, although Plaintiffs removed the cause of action for unjust enrichment from the SAC, the causes of action for wrongful foreclosure and cancellation of instruments remain. Again, the Court never granted Plaintiffs leave to amend the FAC or SAC to include these new causes of action. Therefore, the demurrer is sustained as to the first and fourth causes of action for wrongful foreclosure and cancellation of instruments without leave to amend.

Statute of Limitations

The Court previously sustained Defendants’ demurrer on the grounds that the causes of action based on fraud were barred by the statute of limitations. Specifically, the causes of action for declaratory relief/wrongful foreclosure, intentional misrepresentation, negligent misrepresentation, and unjust enrichment were barred under the applicable three-year statute of limitations for fraud. (Code Civ. Proc., section 338.)

Here, the basic facts in the SAC remain the same. Plaintiffs would have known of the alleged fraud by the time a foreclosure sale took place in May 2020. The statute of limitations thus ran in May 2023. Plaintiffs did not file this action until June 2023. Therefore, as before, the causes of action based on fraud are barred by the applicable statute of limitations.

The second cause of action for breach of the covenant of good faith and fair dealing is also barred by the statute of limitations. The covenant of good faith and fair dealing is implied by law in every contract, and it acts “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.” (Racine & Laramie, Ltd. v. Department of Parks & Recreation (1992) 11 Cal.App.4th 1026, 1031-1032.) The statute of limitations for an oral contract is two years. (Code Civ. Proc., section 339.)

Again, the basic facts in the SAC remain the same as in the FAC. Defendants breached the covenant of good faith and fair dealing by representing to Plaintiffs that they would allow him to repurchase the subject property at a private sale before wrongfully selling the property. Because the SAC does not allege there was a written agreement, it is reasonable to infer that this agreement was oral. Therefore, the statute of limitations ran in May 2022, nearly one year before Plaintiffs filed this action. As before, this cause of action is also barred by the applicable statute of limitations.

Additionally, the cause of action for abuse of process is also barred by a two-year statute of limitations. (Code Civ. Proc., section 335.1; Cantu v. Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 886-87.)

The SAC fails to state any new facts which would change the statute of limitations analyses. Therefore, the demurrer is sustained as to the first through fifth causes of action without leave to amend.

Res Judicata

The Court previously sustained Defendants’ demurrer on the grounds that Plaintiffs’ claims were barred by an earlier unlawful detainer judgment in the case 21VEUD00800. (Defendants’ RJN, Exh. 7.) There, a court entered judgment in favor of Deutsche Bank National Trust Company and against Duane Folke. The case concerned the same property as the one in this action.

Subsequent fraud or quiet title suits founded upon allegations of irregularity in a trustee’s sale are barred by a prior unlawful detainer judgment. (Vella v. Hudgins (1977) 20 Cal.3d 251, 256.)

Here, the SAC again alleges the same facts as the FAC. Plaintiffs’ quiet title cause of action and the causes of action based on fraud each allege that Defendants represented that they would allow Plaintiffs to repurchase the subject property before breaching this agreement and moving forward with the foreclosure sale. (SAC ¶¶48-50, 57, 61.) Because these allegations are directly related to the foreclosure sale, they are barred by the prior unlawful detainer judgment entered in Deutsche Bank’s favor. Therefore, the quiet title and fraud actions are barred by the doctrine of res judicata.

The SAC includes new allegations that the trial court’s refusal to consolidate the unlawful detainer proceeding with a pending quiet title action prejudiced Plaintiffs. Additionally, the SAC alleges that an emergency rule should have prevented the underlying unlawful detainer judgment. However, these facts do not change that judgment was entered against Plaintiff in a prior unlawful detainer judgment. The judgment bars this subsequent suit for fraud and irregularity in the foreclosure sale.

Unfair Business Practices

The Court previously sustained Defendants’ demurrer to the cause of action for unfair business practices because the FAC failed to identify any injury caused by Defendants’ alleged unlawful, unfair, or fraudulent conduct.

To successfully plead a UCL claim for unfair business practices, a plaintiff must allege facts justifying relief in the form of protecting the public from unfair business practices or deceptive advertising. (Day v. AT&T Corp. (1998) 63 Cal.App.4th 325, 331-332.) A plaintiff must plead and prove that the defendant engaged in a business practice that was either unlawful (i.e., is forbidden by law) or unfair (i.e., harm to victim outweighs any benefit) or fraudulent (i.e., is likely to deceive members of the public). (Albillo v. Intermodal Container Services, Inc. (2003) 114 Cal.App.4th 190, 206.)

A plaintiff fails to satisfy the causation prong of the statute if he or she would have suffered the same harm whether or not a defendant complied with the law. (Daro v. Superior Court (2007) 151 Cal.App.4th 1079, 1099.) For example, where a foreclosure is triggered by the borrower’s underlying default, there is no link between the injury and the unfair business practice that is the gravamen of the claim. (Jenkins v. JPMorgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 522 (overruled on other grounds).)

Again, the facts in the SAC remain the same as the FAC. The foreclosure sale at issue was triggered by Plaintiffs’ default, not by Defendants’ alleged unlawful, unfair, or fraudulent conduct. (SAC p.55.) As before, SAC fails to allege any other conduct which triggered the foreclosure. Thus, there is no connection between Plaintiffs’ injury and Defendants’ alleged unlawful, unfair, or fraudulent conduct. Therefore, the demurrer is sustained as to this cause of action.

Plaintiffs’ Opposition

At the initial hearing on this matter, the Court continued the hearing to consider Plaintiffs’ late-filed opposition. Plaintiffs argue in a conclusory manner that the demurrer should be overruled because the SAC alleges sufficient facts to support each element of their causes of action. The opposition does not address the defects identified above.

The opposition further states that Defendants are mistaken that Plaintiffs can no longer obtain equitable relief after the foreclosure process is complete. However, this argument is unsupported. As discussed above, it is well-settled that a subsequent fraud or quiet title suits founded upon allegations of irregularity in a trustee’s sale are barred by a prior unlawful detainer judgment.

Finally, Plaintiffs argue that the demurrer is improperly based on extrinsic evidence or their own interpretation of contract terms. However, none of Defendants’ arguments are based on extrinsic evidence or interpretation of contract terms. Rather, the demurrer is sustained because the causes of action are time-barred, are barred under the doctrine of res judicata, or are not sufficiently pled. Additionally, Plaintiffs added causes of action that fell outside of the scope of the Court’s previous order granting leave to amend. Plaintiff does not address these defects in his opposition.

Leave to Amend

The Court sustained Defendants’ demurrer for the same reasons as their earlier demurrer. Because this is the second time the Court has addressed these issues and Plaintiffs failed to cure the defects identified above, the Court denies leave to amend.

Conclusion

The demurrer is SUSTAINED without leave to amend.