Judge: Cynthia A Freeland, Case: 37-2017-00010745-CU-OR-NC, Date: 2023-10-06 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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SOUTH BUILDING TENTATIVE RULINGS - October 05, 2023

10/06/2023  01:30:00 PM  N-27 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Cynthia A. Freeland

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Civil - Unlimited  Other Real Property Summary Judgment / Summary Adjudication (Civil) 37-2017-00010745-CU-OR-NC COURTOIS VS. BANK OF AMERICA NA [IMAGED] CAUSAL DOCUMENT/DATE FILED: Motion for Summary Judgment and/or Adjudication, 06/23/2023

Defendant Nationstar Mortgage LLC ('Defendant')'s motion for summary judgment is granted.

The parties' respective requests for judicial notice ('RJN') are granted.

Defendant's objections to Mr. Freshman's declaration are sustained. Defendant's objections to Plaintiff Kristi J. Courtois ('Plaintiff')'s declaration are sustained. Plaintiff's objections to Mr. Blunt's declaration are overruled.

Factual Background and Procedural History On April 17, 2006, Plaintiff executed a $215,000.00 InterestOnly Adjustable Rate Note (the 'Note') in favor of Countrywide Home Loans, Inc. ('Countrywide') to purchase the real property located at 2360 Hosp Way #230, Carlsbad, CA 92008 (the 'Property'). See Blunt Decl., Ex. 1. The Note is secured by a Deed of Trust (the 'DOT') recorded against the Property on April 20, 2006. Ibid., Ex. 2. The DOT identifies: (1) Plaintiff as the borrower; (2) Countrywide as the lender; (3) Recontrust Company, N.A.

('Recontrust') as the trustee; and (4) Mortgage Electronic Registration Systems, Inc. ('MERS') as both: (a) Countrywide's and its successors' and assigns' nominee, and (b) the beneficiary under the DOT. Ibid.

On September 30, 2011, an Assignment of Deed of Trust (the 'ADOT') was recorded granting, selling, assigning, transferring, and conveying MERS's beneficial interest under the DOT to Bank of America, N.A., successor by merger to BAC Home Loans Servicing LP fka Country Home Loans Servicing LP ('BANA'). Ibid., Ex. 3. The ADOT identifies: (1) Countrywide as the original lender; (2) Plaintiff as the original borrower; and (3) Recontrust as the original trustee. Ibid. On May 31, 2012, a Corporation Assignment of Deed of Trust (the 'CADOT') was recorded granting, assigning, and transferring BANA's beneficial interest under the DOT to Deutsche Bank National Trust Company, as trustee for holders of the GSAA Home Equity Trust 2006-11 Asset-Backed Certificates Series 2006-11 ('Deutsche Bank').

Ibid., Ex. 4. The CADOT identifies: (1) Plaintiff as the trustor under the DOT, and (2) Recontrust as the trustee under the DOT. Ibid. In July 2013, Defendant became the loan's servicer and was assigned the right to foreclose in its own name on Deutsche Bank's behalf. Ibid., ¶ 9. Plaintiff does not dispute that she has defaulted under the terms of the loan or that she is contractually due for the December 2009 payment (she merely contends that she 'owes payment to the valid, legal creditor' which she argues, according to her Separate Statement, is not Deutsche Bank). See Defendant's Separate Statement of Undisputed Material Facts ('SSUMF') and Plaintiff's Objections Thereto, ¶¶ 5-6, 8.

Shortly after Defendant became the loan's servicer, it received a facsimile to its bankruptcy department that identified the Property and a trustee's sale number for the Property. See Blunt Decl., Ex. 6. The Calendar No.: Event ID:  TENTATIVE RULINGS

2998954 CASE NUMBER: CASE TITLE:  COURTOIS VS. BANK OF AMERICA NA [IMAGED]  37-2017-00010745-CU-OR-NC facsimile informed Defendant that: (1) on August 15, 2013, Plaintiff had executed a Deed of Trust with Assignment of Rents (Short Form) in favor of Fred D. Brown, and (2) on August 16, 2013, Mr. Brown had filed a voluntary Chapter 7 Bankruptcy petition in the U.S. Bankruptcy Court for the Southern District of California (Case No. 13-08261-LA7). Ibid. The Notice of Bankruptcy Case Filing identifies Michael A.

Feldman as Mr. Brown's bankruptcy counsel. Ibid. On August 27, 2013, Defendant sent Mr. Feldman a bankruptcy welcome letter which included instructions for exploring loss mitigation/loan modification options. Ibid., Ex. 7.

On September 12, 2013, Plaintiff submitted initial loan modification paperwork to Defendant. Ibid., Ex. 8.

On October 3, 2013, Defendant mailed a missing documents letter to Mr. Feldman regarding Plaintiff's loan modification application. Ibid., Ex. 9. On March 10, 2014, Defendant spoke with Plaintiff's former attorney, Charles T. Marshall (or a representative of his office), regarding the status of Plaintiff's loan modification application. Defendant informed Mr. Marshall and/or his staff of the missing documents and that the loan was not currently in foreclosure. Mr. Marshall and/or his staff promised to provide the missing documents, including a letter of explanation for the profit and loss request that Plaintiff did not own a business, HOA proof of payment, and a luxury bill showing proof of occupancy. See Defendant's SSUMF and Plaintiff's Objections Thereto, ¶¶ 17-19. On March 14, 2014, Plaintiff submitted at least some of the missing loan modification application documents (though the parties dispute whether complete information was provided). Ibid., ¶¶ 20-21. On April 26, 2014, Defendant denied Plaintiff's loan modification application as incomplete. Defendant sent the denial letter to Mr. Feldman. See Blunt Decl., Ex. 10. On June 13, 2016, Defendant sent Mr. Feldman a trial period plan solicitation. Ibid., Ex. 11.

Defendant contends that on October 13, 2016 and April 14, 2017, one of its representatives contacted Plaintiff to discuss her financial situation and avoid foreclosure. Ibid., ¶¶ 21-22. However, Plaintiff contends that no such conversation took place once she informed the representative that she was represented by counsel. To date, the Property has not been sold at foreclosure and Plaintiff continues to occupy and remain in possession of it. See Defendant's SSUMF and Plaintiff's Opposition Thereto, ¶ 34.

Plaintiff commenced this action on March 24, 2017. See ROA No. 1. On February 20, 2019, Plaintiff filed the operative First Amended Complaint (the 'FAC') against BANA, Recontrust, Deutsche Bank, Goldman Sachs Mortgage Corporation, and Defendant for: (1) cancellation of instruments; (2) slander of title; (3) violations of the California Homeowner Bill of Rights and California Civil Code §§ 2923.55, 2923.5, and 2924.17; (4) violations of California Business & Professions Code ('BPC'); (5) declaratory and injunctive relief; (6) invasion of privacy; (7) negligence; and (8) breach of confidence. See ROA No.

201. Plaintiff asserted the following claims against Defendant: (1) the third cause of action (violations of the HBOR and Civil Code); (2) the fourth cause of action (violations of the BPC); (3) the fifth cause of action (declaratory and injunctive relief); (4) the sixth cause of action (invasion of privacy); (5) the seventh cause of action (negligence); and (6) the eighth cause of action (breach of confidence).

On December 4, 2020, the court: (1) granted Defendant's motion for judgment on the pleadings ('JOP') as to the third, fifth, and sixth causes of action without leave to amend; (2) granted Defendant's motion for JOP as to the fourth and eighth causes of action with leave to amend; and (3) denied Defendant's motion for JOP as to the seventh cause of action, and set a January 4, 2021 deadline for Plaintiff to file a further amended pleading. See ROA No. 503. She failed to do so. On April 7, 2023, the court granted Plaintiff's motion for leave to file a Second Amended Complaint as to her UCL and breach of confidence claims, and set an April 17, 2023 deadline for her to file her further amended pleading. See ROA No.

653. She failed to do so. Consequently, the only remaining cause of action at issue against Defendant in this action is the seventh cause of action for negligence.

On November 23, 2021, the court denied Defendant's motion for summary judgment or, alternatively, summary adjudication as to Plaintiff's negligence claim owing to disputed material facts as to: (1) the trigger date for purposes of calculating the statute of limitations, and (2) the imposition of a duty of care upon Defendant. See ROA No. 567. More specifically, and as is relevant to the present motion, the court noted as follows: [T]he court acknowledges a split of authority. Courts generally agree that a lender has no duty to offer, Calendar No.: Event ID:  TENTATIVE RULINGS

2998954 CASE NUMBER: CASE TITLE:  COURTOIS VS. BANK OF AMERICA NA [IMAGED]  37-2017-00010745-CU-OR-NC consider, or approve a loan modification application. See Lueras, 221 Cal. App. 4th at 67; Rossetta v. CitiMortgage, Inc. (2017) 18 Cal. App. 5th 628, 637-638; Sheen v. Wells Fargo Bank, N.A. (2019) 38 Cal. App. 5th 346, 358. However, 'courts are divided on the question of whether accepting documents for a loan modification is within the scope of a lender's conventional role as a mere lender of money, or whether, and under what circumstances, it can give rise to a duty of care with respect to the processing of the loan modification application.' Rossetta, 18 Cal. App. 5th at 638.

See ROA No. 567, p. 5.

Analyzing the factors set forth in Biakanja v. Irving (1958) 49 Cal. 2d 647 ('Biakanja'), the court determined that summary judgment was precluded owing to numerous triable issues of fact as to the second, third, and fourth Biakanja factors. Additionally, the court could not conclude, as a matter of law, that Plaintiff and Defendant were in a special relationship such that Defendant could avail itself of the 'economic loss rule.' On June 23, 2023, Defendant file this renewed motion for summary judgment as to Plaintiff's negligence cause of action in light of the California Supreme Court's decision in Sheen v. Wells Fargo Bank, N.A.

(2022) 12 Cal. 5th 905 ('Sheen').

Legal Analysis Motions for summary judgment and adjudication are subject to the same rules and procedures. See Lunardi v. Great-West Life Assurance Co. (1995) 37 Cal. App. 4th 807, 819; Cal. Code Civ. P. § 437c(f)(2). The court applies a three-step analysis when ruling on a motion for summary judgment or adjudication: (1) identify the causes of action, issue(s) of duty or defense framed by the pleadings; (2) determine whether the movant has satisfied his or her burden of showing the defense or causes of action have no merit because one or more elements cannot be established, or that there is a complete defense to the cause or causes of action, or that a duty exists or does not exist; and (3) if the movant has made a prima facie showing that he or she is entitled to judgment as a matter of law, the burden shifts and the court determines whether the opposing party has provided evidence of a triable material fact as to the cause of action, issue of duty or defense. See Linden Partners v. Wilshire Linden Assocs.

(1998) 62 Cal.4th 508, 518; Choi v. Sagemark Consulting (2017) 18 Cal. App. 5th 308, 318 (citing Cal. Code Civ. P. §§ 437c(o), (p)(2); Pipitone v. Williams (2016) 244 Cal. App. 4th 1437, 1449). The opposing party 'must set forth specific facts beyond the pleadings to show the existence of a triable issue of material fact.' Choi, 18 Cal. App. 5th at 318 (citing Cal. Code Civ. P. § 437c(p)(2)). 'There is a triable issue of fact if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof.' Aguilar v. Atlantic Richfield Co. (2001) 25 Cal. 4th 826, 850. The court must 'liberally construe the evidence in support of the [opposing party] and resolve doubts concerning the evidence in favor of that party.' Dore v. Arnold Worldwide, Inc. (2006) 39 Cal. 4th 384, 389. Where, as here, a party has already sought summary judgment on issues that were denied by the court, the party may not move/renew its motion for summary judgment 'unless that party establishes, to the satisfaction of the court, newly discovered facts or circumstances or a change of law supporting the issues reasserted in the summary judgment motion.' Cal. Code Civ. P. § 437c(f)(2).

Defendant's motion for summary judgment is granted. The elements for negligence are: '(1) a legal duty to use due care; (2) a breach of that duty; and (3) the breach as the proximate or legal cause of the resulting injury.' Spinks v. Equity Residential Briarwood Apartments (2009) 171 Cal. App. 4th 1004, 1046. In this instance, the court must respectfully agree with Defendant that, in light of the holding in Sheen, summary judgment is warranted as Plaintiff cannot demonstrate that Defendant owed her a legal duty of care.

In Sheen, plaintiff Kwang K. Sheen took two junior loans from Wells Fargo Bank, N.A. using his residence as collateral. After suffering financial setbacks and missing payments on the junior loans, Mr.

Sheen submitted loan modification applications to Wells Fargo. Wells Fargo did not respond. Instead, it Calendar No.: Event ID:  TENTATIVE RULINGS

2998954 CASE NUMBER: CASE TITLE:  COURTOIS VS. BANK OF AMERICA NA [IMAGED]  37-2017-00010745-CU-OR-NC sent Mr. Sheen letters informing him of the actions Wells Fargo might take because of the delinquency on his accounts, although the letters did not specifically mention 'foreclosure.' Mr. Sheen construed the letters as an acceptance of his loan modification applications and the conversion of the loans to unsecured loans, and he believed that his residence would not be subject to foreclosure. Wells Fargo eventually assigned its beneficial/ownership interest and servicing rights to Mirabella Investment Group, LLC ('Mirabella'), which then foreclosed on Mr. Sheen's property. Mr. Sheen sued Mirabella, the loan's servicer at the time of the foreclosure (FCI Lender Services, Inc.), and Wells Fargo for promissory estoppel, intentional infliction of emotional distress, negligence, and violation of the UCL. In relevant part, as to the negligence cause of action, Mr. Sheen alleged that Wells Fargo owed him a duty of care to process, review, and respond carefully and completely to the loan modification applications he submitted. Mr. Sheen further alleged that Wells Fargo breached this duty which caused Mr. Sheen to forgo alternatives to foreclosure. The trial court sustained Wells Fargo's demurrer on the grounds that Wells Fargo owed no duty to 'respond timely to [Mr. Sheen's] request to modify the second trust deed.' Sheen, 12 Cal. 5th at 919. The Court of Appeal affirmed.

The California Supreme Court thus was faced with the issue of whether 'a lender owe[s] the borrower a tort duty sounding in general negligence principles to (in plaintiff's words) 'process, review and respond carefully and completely to [a borrower's] loan modification application,' such that upon a breach of this duty the lender may be liable for the borrower's economic losses – i.e., pecuniary losses unaccompanied by property damages or personal injury[.]' Ibid., at 915, 919. Acknowledging a split of authority on this issue, the California Supreme Court affirmed the lower courts' rulings. In so holding, the Court began by noting that a duty of care may arise through statute or by operation of the common law. However, no such statute existed in Sheen to impose such a duty of care. California Civil Code § 1714 does not impose a general duty to avoid purely economic losses. While the HBOR sets forth the process that mortgage servicers must follow with regard to handling loan modification applications, it did not apply in Sheen because the HBOR applies only to first lien mortgages.

The Court further rejected Mr. Sheen's effort to ground his negligence claim in the common law. First, the Court found that Mr. Sheen's negligence claim was barred by the economic loss rule because his claim arose from, and was not independent of, the mortgage contract between Mr. Sheen and Wells Fargo. To that point, the Court noted that the parties had rights and obligations with respect to the mortgage – but they did not agree that should Mr. Sheen default and attempt to renegotiate his loan by submitting a loan modification application, Wells Fargo would process, review, and respond carefully and completely to the applications. The Court further rejected Mr. Sheen's argument that the lower courts should have applied the Biakanja factors and found a duty of care exists in the mortgage servicing contexts. More specifically, the Court noted that '[u]nder its terms, Biakanja does not apply when the plaintiff and defendant are in contractual privity for purposes of the suit at hand.' Ibid., at 937. 'Put differently, Biakanja does not displace the contractual economic loss rule when that rule squarely applies.' Ibid. In sum, the Court stated that 'on both doctrinal and pragmatic grounds, we conclude that the Biakanja factors are not applicable when, as here, the litigants are in contractual privity and the plaintiff's claim is not 'independent of the contract arising from principles of tort law.'' Ibid., at 942.

The court finds that Sheen is apposite and controlling. Plaintiff has argued that Defendant acted negligently and with a reckless disregard of her rights and privacy by communicating information about her finances and mortgage to a third party, i.e., Mr. Feldman. The FAC alleges that Defendant had a duty to protect Plaintiff's private information, which it breached by way of its disclosure to Mr. Feldman.

Such breach has harmed Plaintiff by having her financial information disclosed in such a manner that she cannot protect herself from how or when that information may be further disclosed to others. In addition, Defendant's conduct has caused Plaintiff emotional distress. Moreover, because of Defendant's negligence, Plaintiff has been deprived of entering into any meaningful communications to restructure her mortgage loan to retain ownership of the Property. Had Defendant engaged in actual communications with Plaintiff regarding a loan modification, there would have been less delay in the process and unwarranted late fees and charges would not have accrued. See FAC, ¶¶ 69, 148-154.

Plaintiff's contentions fall squarely within Sheen's purview. As in Sheen, Plaintiff's negligence claim Calendar No.: Event ID:  TENTATIVE RULINGS

2998954 CASE NUMBER: CASE TITLE:  COURTOIS VS. BANK OF AMERICA NA [IMAGED]  37-2017-00010745-CU-OR-NC arises out of the contractual agreement between her and Defendant. Plaintiff fails to identify any contractual provision requiring Defendant to keep her financial information private or to otherwise conduct itself in a particular manner in handling her loan modification application(s), or that a failure to do so constitutes a breach of contract. Plaintiff's attempts to distinguish Sheen on numerous grounds fail. First, while it is true that the loans at issue in Sheen were secured by second and third position liens, Plaintiff cites no authority that Sheen should be read so narrowly, and the court declines to do so.

Second, Plaintiff contends that, unlike in Sheen, Defendant does not have a contract with Plaintiff and is instead acting as an agent for Deutsche Bank. The California Supreme Court rejected this argument. In Sheen, Wells Fargo was both the principal/owner and the agent/servicer. The Court noted that '[d]espite the fact that Wells Fargo was behaving much as banks involved in '[t]raditional mortgage lending' do, plaintiff would have us impose a duty on Wells Fargo regardless. It is difficult to see how doing so would be justified when the asserted basis for the duty is that servicers do not act in the owners' interests.' Ibid., at 945-946. Put differently, the fact that Defendant was the agent of Deutsche Bank, and not the principal/owner of the loan is immaterial and does not remove it from the principal holding in Sheen.

Third, Plaintiff argues that Defendant owed Plaintiff a duty by virtue of the parties' special relationship under the HBOR. This contention is unavailing. The court must respectfully agree with Defendant that this appears to be an attempt by Plaintiff revive her dismissed claim(s) under the HBOR. In addition, to the extent Plaintiff urges the court to apply the Biakanja factors to impose a duty of care upon Defendant, such suggestion runs afoul of Sheen's holding because the evidence shows that: (1) Plaintiff and Defendant are in contractual privity, and (2) Plaintiff's negligence claim is not independent of the contract between the parties.

Finally, Plaintiff contends that the 'extraordinary advice' exception set forth in Sheen should apply. The court respectfully disagrees. More specifically, the Court, in identifying opinions from other jurisdictions that support its ultimate holding, stated: Likewise, in House v. U.S. Bank Nat. Assn. (Mont. 2021) 481 P.3d 820, 828, the Montana Supreme Court reiterated that '[u]nless otherwise provided by contract, a lender generally has no duty to modify, renegotiate, waive, or forego enforcement of the terms of a mortgage loan in order to assist a borrower to avoid a default or foreclosure.' Therefore, '[a]lleged errors or omissions by a lender in the servicing or administration of a mortgage loan [are] ... generally compensable only in contract ....' (Ibid.; see also Flagstaff Housing v. Design Alliance, Inc., (2010) 223 Ariz. 320, 223 P.3d 664, 670 [stating that in the construction defect context 'if the parties do not provide otherwise in their contract, they will be limited to contractual remedies' for pure economic loss].) The Montana high court did note that 'if the lender gives extraordinary advice ... beyond that customary in arms-length lending and loan servicing transactions,' such 'extraordinary circumstances ... may ... independently give rise to a special common law fiduciary duty of care.' (House, at pp. 828–829; see also id. at p. 829 ['However, ... merely offering, administering, or providing general information regarding program eligibility, requirements, or process for a distressed loan modification ... is insufficient alone to give rise to a special fiduciary relationship or duty between a lender and borrower'].) Sheen, 12 Cal. 5th at 927.

In this case, the alleged wrongdoing by Defendant is the dissemination of Plaintiff's personal financial information to a third party without Plaintiff's prior authorization. Defendant admits in its reply that it may have erred in determining to which party to send the information. However, the court must agree with Defendant that such conduct does not give rise to the type of 'extraordinary' circumstances set forth in Sheen. Defendant was offering and/or providing general information regarding its loan modification program – it was simply doing so to the wrong party. Defendant's conduct was customary in arms-length lending and loan services transactions. Plaintiff cites no authority for the proposition that the exception set forth in Sheen should be extended to the present circumstances.

Accordingly, the court grants Defendant's motion for summary judgment as to Plaintiff's negligence Calendar No.: Event ID:  TENTATIVE RULINGS

2998954 CASE NUMBER: CASE TITLE:  COURTOIS VS. BANK OF AMERICA NA [IMAGED]  37-2017-00010745-CU-OR-NC cause of action.

Conclusion In light of the foregoing, the court grants Defendant's motion for summary judgment. Defendant is directed to submit a proposed Judgment consistent with this ruling.

This is the tentative ruling for the hearing at 1:30 p.m. on Friday, October 6, 2023. If no party appears at the hearing, this tentative ruling will become the order of the court as of October 6, 2023. If the parties are satisfied with the court's tentative ruling or do not otherwise wish to argue the motion, they are encouraged to give notice to the court and each other of their intention not to appear, though this notice is not required.

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