Judge: Daniel M. Crowley, Case: 22SMCV00983, Date: 2023-04-04 Tentative Ruling
Case Number: 22SMCV00983 Hearing Date: April 4, 2023 Dept: 207
Background
The action arises from a loan agreement between borrower
Clarence Ohashi and third-party Mortgage Electronic Registration System, Inc.
secured by a deed of trust for the property located at 411 Westlawn Ave., Los
Angeles, CA 90066. The deed of trust was subsequently transferred to Defendant
Plaza Home Mortgage (“Defendant”) in 2018. Mr. Ohashi passed away in May 2020.
Plaintiff Francine Ohashi (“Plaintiff”) is Mr. Ohashi’s daughter and brings
this action against Defendant in her capacity as administrator of Mr. Ohashi’s
estate alleging several violations of the Homeowner’s Bill of Rights codified
at Civ. Code § 2923.4 et seq. (“HBOR”) in connection with the loan made to her
father.
The Court previously sustained a demurrer filed by Defendant
with leave to amend. On January 9, 2023, Plaintiff filed the operative First
Amended Complaint (“FAC”) asserting nine causes of action against Defendant for
wrongful foreclosure, violation of Business & Professions Code § 17200,
cancellation of written instruments, violation of Title 12 C.F.R. §
1024.38(b)(2), violation of Title 12 C.F.R. § 1024.38(b)(2)v, violation of
Title 12 C.F.R. 1024.35, and three causes of action alleging violations of the
HBOR. Defendant brings this demurrer to each of the nine causes of action
asserted against it, arguing they fail to state a cause of action and are
uncertain under Code Civ. Proc. §§ 430.10 (e) and (f).
Defendant’s demurrer is unopposed.
Request for Judicial Notice
Defendant requests the Court take judicial notice of seven
documents filed with the Los Angeles County Recorder’s Office as well as a
complaint and request for dismissal filed in a prior lawsuit, Los Angeles
Superior Court case number 22STCV09380, and an Affidavit of Claim for Surplus
Funds. Courts can take judicial notice of the existence of Court records. (Arce
ex rel. Arce v. Kaiser Found. Health Plan, Inc. (2010) 181 Cal.App.4th 471,
483; Schmidlin v. City of Palo Alto (2007) 157 Cal.App.4th 728, 790
n.10.) This includes the records of any Court of record in the United States. (Salazar
v. Upland Police Dept.¿(2004) 116 Cal.App.4th 934, 946.) However, while
Courts may take judicial notice of official acts and public records, they
cannot take judicial notice of the truth of the matters stated therein. (In
re Joseph H.¿(2015) 237 Cal.App.4th 517, 541.) Defendant’s request is
unopposed and is granted. The Court will take judicial notice of the existence
of, recording of, and legal effect of such recorded instruments, and not as to
the truth of any disputed factual matters therein.
Demurrer Standard
When considering demurrers, courts read the allegations
liberally and in context. (Wilson v. Transit Authority of City of Sacramento
(1962) 199 Cal.App.2d 716, 720-21.) In a demurrer proceeding, the defects must
be apparent on the face of the pleading or via proper judicial notice. (Donabedian
v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer tests the
pleading alone, and not on the evidence or facts alleged.” (E-Fab, Inc. v.
Accountants, Inc. Servs. (2007) 153 Cal.App.4th 1308, 1315.) As such,
the court assumes the truth of the complaint’s properly pleaded or implied
factual allegations. (Id.) However, it does not accept as true
deductions, contentions, or conclusions of law or fact. (Stonehouse Homes
LLC v. City of Sierra Madre (2008) 167 Cal.App.4th 531, 538.)
The general rule is that the
plaintiff need only allege ultimate facts, not evidentiary facts. (Doe v.
City of Los Angeles (2007) 42 Cal.4th 531, 550.) “All that is required of a
plaintiff, as a matter of pleading, even as against a special demurrer, is that
his complaint set forth the essential facts of the case with reasonable
precision and with sufficient particularity to acquaint the defendant with the
nature, source and extent of his cause of action.” (Rannard v. Lockheed
Aircraft Corp. (1945) 26 Cal.2d 149, 156-157.)
A special demurrer
for uncertainty under Section 430.10(f) is disfavored and will only be
sustained where the pleading is so unintelligible that a defendant cannot
reasonably respond—i.e., cannot reasonably determine what issues must be
admitted or denied, or what counts or claims are directed against him/her. (Khoury
v. Maly’s of Calif., Inc. (1993) 14 Cal.App.4th 612, 616.) Moreover, even
if the pleading is somewhat vague, “ambiguities can be clarified under modern
discovery procedures.” (Id.)
Analysis
1. Meet
and Confer Requirement
The Court
finds that Defendant has complied with the meet and confer requirements set
forth under Code of Civil Procedure § 430.41. (Chvat Decl. at 1.)
2. Seventh,
Eighth and Ninth Causes of Action
The
seventh, eighth, and ninth causes of action asserted in the FAC are new causes
of action which were not included in Plaintiff’s original Complaint. While the
Court sustained Defendant’s prior demurrer with leave to amend, the “granting
of leave to amend must be construed as permission to the pleader to amend the
cause of action which he pleaded in the pleading to which the demurrer has been
sustained.” (People ex rel. Dept. of Public Works v. Clausen (1967) 248
Cal.App.2d 770, 785.) In other words, an order sustaining a demurrer to a prior
complaint with leave to amend grants a plaintiff leave to amend only the causes
of action asserted in the prior complaint, not leave to add entirely new causes
of action, unless the new cause of action directly responds to the court's
reason for sustaining the earlier demurrer. (Patrick v. Alacer Corp.
(2008) 167 Cal.App.4th 995, 1015.) The Court sustained Defendant’s earlier
demurrer based on Plaintiff’s failure to allege standing to sue under the HBOR
and for failure to join indispensable parties. The seventh, eighth, and ninth
causes of action assert violations of federal statutes and are not related or
responsive to the bases on which the Court sustained the prior demurrer.
Plaintiff
was thus required to seek leave of Court to add these additional causes of
action. Having failed to do so, the seventh, eighth, and ninth causes of action
are stricken pursuant to Code Civ. Proc. § 436.
3. Homeowner’s
Bill of Rights
Plaintiff’s
first three causes of action allege violation of the HBOR. The HBOR was enacted
“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, if any, offered by or through the borrower's mortgage
servicer, such as loan modifications or other alternatives to foreclosure.”
(Civ. Code § 2923.4; see Valbuena v. Ocwen Loan Servicing, LLC (2015)
237 Cal.App.4th 1267, 1272.) “To enforce [its] new requirements, the HBOR
creates a private right of action allowing a borrower to seek injunctive relief
to enjoin a material violation of the act prior to foreclosure and to assert a
claim for damages for a violation of the act following foreclosure.” (Alvarez
v. BAC Home Loans Servicing, L.P. (2014) 228 Cal.App.4th 941, 951.) This
private right of action is limited to violations of specific code sections.
(Civ. Code § 2924.12.) The FAC alleges violations of the provision of the HBOR
as codified at Civil Code §§ 2923.5, 2924(a)(1), and 2924.9.
Defendant
argues Plaintiff lacks standing to bring claims under the HBOR as Plaintiff is
not the “borrower” on the subject loan. The Court agrees.
“Every
action must be prosecuted in the name of the real party in interest, except as
otherwise provided by statute.” (C.C.P. § 367.) Plaintiff brings this action as
the administrator of the estate of decedent Mr. Ohashi. Defendant argues at the
time the subject mortgage loan was issued, the property was not owned by Mr.
Ohashi but rather was owned by the Ohashi Family Trust Dated November 20, 1997.
Defendant states that because Mr. Ohashi did not own the property, the property
is not an asset of his personal estate over which Plaintiff, as the estate’s
administrator, has any interest in. The FAC acknowledges the property was not
owned by Mr. Ohashi as it expressly states “Mr. Ohashi had a large savings
amount, so money was not an issue. The loan here was taken out in the name of
the trustor, Clarence N. Ohashi, Successor Trustee for the Ohashi Family Trust dated
November 20, 1997. This establishes that the parties were aware and knew that
the Subject Property was in the trust….” (FAC at ¶19.) This is further
evidenced by the Deed of Trust which memorialized the subject mortgage loan,
which states “The trustor is Clarence N. Ohashi, Successor Trustee of the
Ohashi Family Trust Dated November 20, 1997, whose address is 4411 Westlawn Avenue,
Los Angeles, CA 90066 (‘Borrower’).” (Ex. A to FAC.) It further provides “The
term ‘Borrower’ does not include the Borrower’s successors and assigns.” (Id.)
The Court
previously sustained Defendant’s demurrer on this ground but granted Plaintiff
leave to amend to state a viable basis for standing under the HBOR. Plaintiff
attempted to remedy this issue by adding one paragraph to the first cause of
action stating “Pursuant to Title 12 CFR §1026.20(a)(b) and (f), Title 12
C.F.R. §1024.38(b)(2), Title 12 CFR §1024.35 and Title 12 C.F.R.
§1024.38(b)(2)v, the survivors and heirs here have a right of action for
violations of the Consumer Financial Protection Bureau Survivorship Rules upon
the beneficiary or servicer of the subject loan being notified of the death of
the trustor to a Deed of Trust.” (FAC at ¶29.) However, as set forth above, the
private right of action under HBOR extends only to violations of the specific
Civil Code sections enumerated in Civ. Code § 2924.12 and does not extend to
violations of the provisions of the Code of Federal Regulations cited by
Plaintiff. Accordingly, the alleged violations of these federal statutes do not
confer standing on Plaintiff to bring a claim under HBOR concerning a mortgage
on which it was not the borrower.
The Court
thus SUSTAINS Defendant’s demurrer to Plaintiff’s first three causes of action
based on lack of standing. As the Court has previously given Plaintiff the
opportunity to cure this defect and Plaintiff has not filed any opposition to
Defendant’s demurrer or otherwise claimed this issue can be cured by further
amendment, Defendant’s demurrer is sustained without leave to amend.
4. Wrongful
Foreclosure
“The elements of a wrongful foreclosure cause of action 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.” (Citrus
El Dorado, LLC v. Chicago Title Co. (2019) 32 Cal.App.5th 943, 948 [quotations
and brackets omitted].)
Defendant
argues Plaintiff has failed to satisfy the tender requirement. The FAC
acknowledges the tender rule applies to Plaintiff’s cause of action for
wrongful foreclosure, but states “PLAINTIFF is excused from the tender requirement
because of PHM DEFENDANT’s violations of Civ. Code §2923.5, 2924(a)(1),
2934a(a)(1), 2924a(e) and 2924.9, and also Title 12 C.F.R. §1024.38(b)(2),
Title 12 CFR §1024.35 and Title 12 C.F.R. §1024.38(b)(2)v.” (FAC at ¶53.) Plaintiff
appears to be arguing the tender rule does not apply because Plaintiff contends
the foreclosure sale was illegal. But this argument would render the tender
rule superfluous. As set forth above, to state a cause of action for wrongful
foreclosure, a plaintiff must plead the trustee or mortgagee caused an illegal,
fraudulent, or willfully oppressive sale of real property. If plaintiffs were
excused from the tender requirement wherever they asserted the sale was
illegal, fraudulent, or oppressive, the tender rule could never be applied.
Courts have recognized exceptions to the tender rule, none of which are
applicable here:
Courts have applied equitable exceptions to the tender rule, such as:
“(1) where the borrower's action attacks the validity of the underlying debt,
tender is not required since it would constitute affirmation of the debt; (2)
when the person who seeks to set aside the trustee's sale has a counter-claim
or set-off against the beneficiary, the tender and the counter-claim offset
each other and if the offset is greater than or equal to the amount due, tender
is not required; (3) a tender may not be required if it would be ‘inequitable’
to impose such a condition on the party challenging the sale; … (4) tender is
not required where the trustor's attack is based not on principles of equity
but on the basis that the trustee's deed is void on its face (such as where the
original trustee had been substituted out before the sale occurred)[;] [(5)]
when the loan was made in violation of substantive law, or in breach of the
loan agreement or an agreement to modify the loan[;] [and (6)] when the
borrower is not in default and there is no basis for the foreclosure … .” (5
Miller & Starr, Cal. Real Estate (4th ed. 2017) § 13:256, pp. 13-1101 to
13-1102, fns. omitted.)
(Turner v. Seterus, Inc. (2018) 27 Cal.App.5th 516,
525-526.) In addition to this failure to satisfy the tender rule, the FAC does
not adequately plead how it was injured by the wrongful foreclosure of a
property which was not held by decedent or his estate, but rather by a separate
trust entity. The Court thus SUSTAINS Defendant’s demurrer with leave to amend.
5. Unfair
Business Practices
California’s Unfair Competition Law
(“UCL”), codified at Business and Professions Code section 17200 et seq.,
prohibits “any unlawful, unfair, or fraudulent business act or practice.” (Bus.
& Prof. Code § 17200; see Clark v. Superior Court (2010) 50 Cal.4th
605, 610.) A UCL plaintiff must plead and prove the defendant engaged in a
business practice which 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.) “An unlawful business
practice or act within the meaning of the UCL is an act or practice, committed
pursuant to business activity, that is at the same time forbidden by law.” (Bernardo
v. Planned Parenthood Federation of America (2004) 115 Cal.App.4th 322,
351.)
A private plaintiff has standing to
bring a UCL claim if the plaintiff “has suffered injury in fact and has lost money
or property as a result of the unfair competition.” (Bus. & Prof. Code §
17204.) In other words, the plaintiff must have suffered a “loss or deprivation
of money or property sufficient to qualify as injury in fact, i.e., economic
injury … .” (Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 322.)
The FAC alleges “PLAINTIFF has suffered an actual, pecuniary injury of the loss
of the equity in the value of the Subject Property, and the costs of seeking a
remedy for PHM DEFENDANT, CELINK DEFENDANT and 2209 DEFENDANT’s wrongful
actions.” (FAC at ¶68.) The FAC fails to explain how Plaintiff was harmed by
the loss of equity in the value of a property which was held by the Trust and
not by decedent or his estate.
Additionally, Plaintiff’s cause of action
under the UCL is predicated on violations of the HBOR and federal regulations.
As set forth above, Plaintiff does not have standing to assert violations of
the HBOR and thus these alleged violations cannot form the basis of the UCL
claim. As for the federal regulations, Plaintiff’s UCL claim alleges Defendant
violated Title 12 C.F.R. §1024.38(b)(2), Title 12 C.F.R. §1024.38(b)(2)v, and
Title 12 CFR §1024.35. (FAC at ¶63.) As Defendant points out, federal courts
have recognized, section 1024.38 does not provide a private right of action but
rather is to be enforced by government regulators. (See, e.g., Courtois v.
Shellpoint Mortg. Servicing, LLC (C.D. Cal. 2020) 2020 U.S. Dist. LEXIS
104468 at *3 [“[Section] 1024.38 does not provide a private right of action”].)
The FAC asserts these alleged violations of sections 1024.38 and 1024.35 are
“actionable pursuant to Title 12 U.S. Code § 2605(f)(1).” (FAC at ¶¶79, 84,
87.) As Defendant points out, section 2605(f) states “[w]hoever fails to comply
with any provision of this section shall be liable to the borrower for each
such failure[.]” As set forth above, Plaintiff has not established she can be
deemed to be the borrower on the subject loan and thus appears to lack standing
to assert claims under section 2605(f).
As it does not appear these issues
could be cured through further amendment, the Court SUSTAINS Defendant’s
demurrer to this cause of action without leave to amend.
6. Cancellation
of Written Instruments
“A written instrument, in respect
to which there is a reasonable apprehension that if left outstanding it may
cause serious injury to a person against whom it is void or voidable, may, upon
his application, be so adjudged, and ordered to be delivered up or canceled.”
(Civ. Code § 3412.) To plead a right to cancellation under this section, a
plaintiff must allege that the instrument is “void or voidable” and would cause
“serious injury” if not cancelled. (Saterbak v. JPMorgan Chase Bank, N.A.
(2016) 245 Cal.App.4th 808, 818-819.) To state a cause of action under section 3412,
a plaintiff “must allege the assignment was void or voidable against her.”
(Ibid.) Plaintiff’s cause of action for cancellation of written
instruments seeks to cancel the Notice of Default and Notice of Trustee’s Sale
recorded against the property.
The Court sustained Defendant’s
prior demurrer to this cause of action because: (1) the Complaint alleged in
conclusory terms that the Notice of Default and Notice of Trustee’s Sale “are
voidable or void ab initio” without providing any factual allegations as to why
these notices could be deemed void or voidable; and (2) the reasonable
apprehension of injury was based on alleged violations of the HBOR for which
Plaintiff had not establish standing to pursue. Having been granted leave to
amend, the only substantive change made by Plaintiff is to allege violations of
the same federal statutes discussed above in connection with Plaintiff’s UCL
claim. (FAC at ¶73.) As set forth above, Plaintiff has not established standing
to pursue claims for violations of these federal statutes. The FAC also does
not add any factual allegations showing that either notice is void or voidable.
Accordingly, the Court SUSTAINS Defendant’s demurrer to this cause of action
without leave to amend.
Conclusion
Defendant’s demurrer to Plaintiff’s Complaint is SUSTAINED
without leave to amend as to Plaintiff’s first, second, third, fifth, and sixth
causes of action. Defendant’s demurrer to Plaintiff’s fourth cause of action is
SUSTAINED with leave to amend. On its own motion, the Court strikes Plaintiff’s
seventh, eighth, and ninth causes of action and OVERRULES Defendant’s demurrer
to these causes of action as moot.