Judge: Christian R. Gullon, Case: 24PSCV00909, Date: 2024-06-27 Tentative Ruling

Case Number: 24PSCV00909    Hearing Date: June 27, 2024    Dept: O

Tentative Ruling

(1)   DEMURRER OF DEFENDANTS SELENE FINANCE LP AND U.S. BANK TRUST NATIONAL ASSOCIATION, NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS OWNER TRUSTEE FOR RCF 2 ACQUISITION TRUST TO PLAINTIFF’S COMPLAINT is SUSTAINED in its entirety with leave to amend because the complaint is contradictory and has not alleged material violation(s).  

(2)   MOTION TO STRIKE OF DEFENDANTS SELENE FINANCE LP AND U.S. BANK TRUST NATIONAL ASSOCIATION, NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS OWNER TRUSTEE FOR RCF 2 ACQUISITION TRUST TO PLAINTIFF’S COMPLAINT is MOOT.[1]

Background

This is a wrongful foreclosure case. Plaintiff Cesar Javier alleges that Defendants SELENE FINANCE, L.P. (“Selene Finance”) and U.S. BANK NATIONAL ASSOCIATION, NOT IN ITS INDIVIDUAL CAPACITY, BUT SOLELY AS OWNER TRUSTEE FOR REF 2 ACQUISITION TRUST (“US Bank”) violated various requirements set forth in the Homeowner Bill of Rights statutes by recording a notice of default without first contacting Plaintiff to discuss his financial situation and/or explore other options aside from foreclosure.

On March 25, 2024, Plaintiff filed suit asserting the following causes of action (COAs):

On May 23, 2024, Defendants filed the instant demurrer with a motion to strike (MTS).

On June 18, 2024, Plaintiff filed his opposition.[2]

On June 20, 2024, Defendants filed their reply.

Request for Judicial Notice (RJN)[3]

Pursuant to Evidence Code §§ 451 and 452, the court takes judicial notice of Exhibits 1-8, all of which are documents that are publicly recorded documents which are put at issue by Plaintiff. (See RJN p. 3, citing Evans v. California Trailer Court, Inc. (1994) 28 Cal.App.4th 540, 549 [court may take judicial notice of recorded deeds]; see also Poseidon Development, Inc. v. Woodland Lane Estates, LLC (2007) 152 Cal.App.4th 1106, 1116 [same]; Pomona College v. Superior Court (1996) 45 Cal. App. 4th 1716, 1727- 1728 [court may take judicial notice of documents referred to in the Complaint even when not attached [“These documents, together with [plaintiff’s] complaint, describe the nature of [defendant’s] mandatory tenure review and grievance procedures.”].)

Discussion

Defendants demur to the entirety of the complaint. The court will address each COA ad seriatim.

1.     Civ. Code § 2923.5 (Failing to notify the homeowner about possible foreclosure and to wait 30 days after notice to record a notice of default)

Pursuant to Civil Code section 2923.5(a)(2), a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of default pursuant to Section 2924 until all of the following: 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, including advising 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.

The complaint alleges the relevant fact:

On April 24, 2023, SF DEFENDANT and RCF 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. (¶25, citing to Ex. E.)

Defendant argues that this allegation is directly contradicted by the notice of default (NOD) and that whether Plaintiff received notification from Defendants is not the inquiry. (Demurrer p. 3, citing to Lupertino v. Carbahal (1973) 35 Cal.App.3d 742, 746-747; Knapp v. Doherty (2004) 123 Cal.App.4th 76, 89.)

Here, indeed a review of Exhibit E as attached to Plaintiff’s complaint, which is dated March 21, 2023, indicates that the “mortgage servicer has contacted the Borrower” but that more than 30 days has passed since the initial contact was made. (Complaint, Ex. E, p. 48 of 82 of PDF.) Notwithstanding, though not argued by Plaintiff, the fact that the judicially noticed document contradicts the allegation is not dispositive. According to the court in Herrera v. Deutsche Bank National Trust Co. (2011) 196 Cal.App.4th 1366, 1375, the truthfulness of the documents remains subject to dispute [Judicial notice of the recorded documents did not establish that the bank was the beneficiary or that reconveyance company was the trustee under the 2003 deed of trust]; see also Lockley v. Law Office of Cantrell, Green, Pekich, Cruz, & McCort (2001) 91 Cal.App.4th 875, 882 [“Judicial notice is the recognition and acceptance by the court, for use by the trier of fact or by the court, of the existence of a matter of law or fact that is relevant to an issue in the action without requiring formal proof of the matter.”].)

To the extent that Defendant relies upon Lupertino (Knapp cites to Lupertino), it is not entirely instructive.[4] The cases addressed Civil Code sections 2924-2924h, which applies to a trustor’s notice of default or notice of sale. (Lupertino, supra, 35 Cal. App.3d at p. 742, 746-747 [“They simply mandate certain procedural requirements reasonably calculated to inform those who may be affected by a foreclosure sale and who have requested notice in the statutory manner that a default has occurred and a foreclosure sale is imminent.”].) Here, however, Civil Code 2923.5 contemplates a different concern because Civil Code section 2923.5 is the initial contact that is not by request but that is mandated to discuss options to avoid foreclosure. Thus, the plain language of the statute provides for communication such that receipt is arguably necessary.

That said, Defendants argument that any violation is immaterial, when read in context with the other COAs/allegations, is persuasive. A material violation is one that affected the borrower’s loan obligations, disrupted the borrower’s loan modification process, or otherwise harmed the borrower. (Demurrer p. 4, citing Morris v. JPMorgan Chase Bank, N.A. (2022) 78 Cal.App.5th 279, 304.) Here, however, Plaintiff merely restates the statutory language to establish materiality.

Therefore, the court SUSTAINS the demurrer with leave to amend.

2.     Violation Of Civ. Code § 2923.7 – Failure To Assign A Single Point Of Contact

California Civil Code §2923.7(a) states: 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.

Plaintiff alleges that he submitted a “complete” request for loan modification assistance and requested that Defendants assign him a Single Point of Contact (“SPOC”) (Complaint ¶ 29) but no SPOC was assigned. (¶30.)

Defendants argue that (i) Plaintiff has not pled that this is a material violation and (ii) the allegation is contradictory.

Here, the court agrees on both fronts. Plaintiff’s allegations are contradicted by paragraph 18 wherein he alleges that on August 20, 2023, Plaintiff’s representative called Selene and spoke to a representative who advised of the notice of missing document. Thus, Plaintiff’s representative was informed of the need to provide missing documents in support of Plaintiff’s application for a loan modification. Even Plaintiff’s opposition continues to contradict the complaint wherein he states that he was not notified of any missing documents. (Opp. p. 6:5-7.)

Therefore, the court SUSTAINS the demurrer as to this 2^nd COA with leave to amend.

3.     Violation Of Civ.Code § 2924.9, Failure to Provide Homeowner With Foreclosure Alternatives

California Civil Code § 2924.9 provides:

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

Plaintiff states that Defendants failed to notify him of all foreclosure prevention alternatives within 5 business days after the NOD was recorded as required by California Civil Code § 2924.9. (Complaint ¶ 37.)

Here, the court directs the parties to the 1^st COA wherein the holding of Lupertino applies. What is more, a violation of this statute would be immaterial because Plaintiff alleges he did submit a loan modification application after the NOD was recorded, so clearly Plaintiff tacitly concedes he was aware of possible alternatives to foreclosure. (Complaint ¶ 16.)

Therefore, the court SUSTAINS the demurrer as to the 3^rd COA.

4.     Violation of California Civil Code § 2924.10

California Civil Code § 2924.10 provides in part: (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.

Plaintiff alleges he sent a loan modification application on August 10, 2023. (Complaint, ¶ 41.)

The court again directs the parties to Lupertino’s holding.

Based on the foregoing, the demurrer to the 4^th COA is sustained with leave to amend.

5.     Wrongful Foreclosure

Plaintiff’s cause of action for Wrongful Foreclosure is premised on the alleged violations of Civil Code §§ 2923.5, 2923.6(c), 2923.7, 2924.9 and 2924.10.

As the foregoing COAs require amendment such that ruling on this COA is somewhat premature, the court SUSTAINS this COA with leave to amend.

6.     Unfair Business Practices

In order to allege a violation of the Cal. Bus. & Prof. Code §17200, a plaintiff must state with reasonable particularity the facts supporting the statutory elements of the violation. Khoury v. Maly's of California (1993) 14 Cal. App. 4th 612, 619. A plaintiff must show either an (1) unlawful, unfair, or fraudulent business act or practice, or (2) unfair, deceptive, untrue, or misleading advertising. Stewart v. Life Ins. Co. of North America (2005) 388 F.Supp.2d 1138. Furthermore, in order to have standing to allege such a claim, the plaintiff must have been injured as a result of the allegedly fraudulent/unfair/unlawful activity in question. (Troyk v. Farmers Group, Inc., (2009) 171 Cal.App.4th 1305, 1346.

As the foregoing COAs require amendment such that ruling on this COA is somewhat premature, the court SUSTAINS this COA with leave to amend.

Conclusion

In sum, even if there were statutory violations, they appear immaterial as Plaintiff’s (contradictory) complaint state that he submitted a loan modification application after the NOD was recorded (thus he was aware of possible alternatives to foreclosure), that he was informed of missing documents because his representative was in contact/had communications with a Selene representative, and that the Notice of Trustee’s Sale that was recorded setting the sale of the Property for August 31, 2023 (RJN Ex. 7) was continued to January 9, 2023 (sic) (Complaint ¶ 15). Based thereon, as the complaint does not plead facts to support material violations, the demurrer is sustained in its entirety with leave to amend and the MTS is moot.