Judge: Deborah C. Servino, Case: 30-2022-01239575, Date: 2022-09-30 Tentative Ruling
Defendants Khosravi Mortgage, Farhad Khosravi aka Farhad Edward Khosravi, and Fariba Partovi Yazdi’s demurrer to Plaintiff Mahmoud Ashouri’s First Amended Complaint (“FAC”) is sustained as set forth below.
Alleged Facts
The FAC alleges that between 2014 and 2018, as borrower, and Farhad Khosravi, as lender, entered into a series of secured loan agreements concerning six commercial Peterbilt trucks. Two of the loans were secured by Plaintiff’s long-time personal residence. (FAC, at ¶ 11.) In March 2016, Plaintiff executed a junior deed of trust against his property in favor of Yazdi, securing an obligation in the principal sum of $50,000 (“2016 Deed of Trust”). While the lender of the funds under the parties’ various loan agreements was Farhad Khosravi, the 2016 Deed of Trust was executed in favor of Yazdi. (FAC, at ¶ 12, Exh. A.) In February 2018, Plaintiff executed a junior deed of trust against his property in favor of Yazdi, securing an obligation in the principal sum of $168,000.00 (“2018 Deed of Trust”). (FAC, ¶ 13, Exh. B.)
The parties got into a dispute as to payments. So to prevent the loss of his home, Plaintiff filed his first lawsuit on September 19, 2019 against Defendants (Ashouri v. Khosravi, Orange County Superior Court case no. 30-2019-01099325). (FAC, at ¶ 14, Exh. C.) The parties settled the lawsuit. (FAC, at ¶ 14, Exh. D.) Pursuant to the Settlement Agreement, Plaintiff and Defendant agreed to liquidate five then-outstanding loan agreements all secured by commercial trucks, in addition to two additional outstanding secured loan agreements, secured by deeds of trust on Plaintiff’s Property for the sum of $689,634.39 to be paid over ten years at an interest rate of 8% per annum. (FAC, at ¶ 15.)
On July 26, 2021, Defendants caused a Notice of Default on the 2018 Deed of Trust to be recorded against the Property. (FAC, at ¶ 17, Exh. E.) On December 21, 2021, Defendants caused to be recorded a Notice of Trustee’s Sale Under Deed of Trust. (FAC, at ¶ 19, Exh. G.) The payoff demand that Defendant provided was wrong. (FAC, at ¶ 22.) The true amount due and owing under the 2016 Deed of Trust and 2018 Deed of Trust based on the parties’ agreements is much less than $342,000. The true balance owing under the Loan Agreements and Settlement Agreement should properly be $200,000 to $250,000. (FAC, at ¶ 20.)
On May 6, 2022, upon Plaintiff’s request, Defendant sent a payoff demand for the 2018 Deed of Trust (“May 6, 2022 Payoff Demand”) demanding $251,510.54 in full satisfaction of the 2018 Deed of Trust. (FAC, at ¶ 20.) Under the express terms of the Settlement Agreement, Defendant was only allowed to assert “Deeds of Trust on [Plaintiff’s] Property to remain as evidence of [that] debt up to $218,000.00 total.” (FAC, at ¶ 21.)
Merits
Recovery of Usurious Interest (First Cause of Action)
The first cause of action is for recovery of usurious interest. Defendants argue that there is no cause of action for recovery of usurious interest under California law. (Dem., at p. 2.) However, this argument is not supported by case authority. (See, e.g., Hardwick v. Wilcox (2017) 11 Cal.App.5th 975, 991; Garver v. Brace (1996) 47 Cal.App.4th 995, 1000; Baruch Inv. Co. v. Huntoon (1967) 257 Cal.App.2d 485, 490.)
The California Constitution, article XV, section 1, states: “No person, association, copartnership or corporation shall by charging any fee, bonus, commission, discount or other compensation receive from a borrower more than the interest authorized by this section upon any loan or forbearance of any money, goods or things in action.” Under current law, that amount is 10 percent. (321 Henderson Receivables Origination LLC v. Sioteco (2009) 173 Cal.App.4th 1059, 1076.) The essential elements of usury are (1) the transaction must be a loan or forbearance; (2) the interest to be paid must exceed the statutory maximum; (3) the loan and interest must be absolutely repayable by the borrower; and (4) the lender must have a willful intent to enter into a usurious transaction. (Bisno v. Kahn (2014) 225 Cal.App.4th 1087, 1097.) There are exemptions to a claim for usury. (See e.g., Cal. Const., art. XV, § 1; Civ. Code, §§ 1916.1, 1916.2, 1917.220; Junkin v. Golden West Service, Inc. (2010) 180 Cal.App.4th 1150, 1155.)
Plaintiff’s opposition does not address the demurrer as to this claim. (See Opp., at pp. 2-7.) Plaintiff alleges that he and “Defendant” entered into the “Loan Agreements, 2019 Lawsuit Settlement Agreement, 2016 Deed of Trust, 2018 Deed of Trust and related agreements” that all contained clauses for usurious interest. (FAC, at ¶ 25.) Plaintiff further alleges that he has been damaged in an amount to be proven at trial “. . . but in no event in a principal amount of less than $31,482.00 (minus any legal interest charges), in addition to treble damages. (FAC, at ¶ 27.) The FAC alleged that “Defendant charged Plaintiff usurious interest on his secured loan balance, secured by the 2018 Deed of Trust.” (FAC, at ¶ 26.) But, the Settlement Agreement contains a release of all claims, 1542 waivers, a merger of all prior agreements, and an integration clause. (FAC, Exh. D at ¶¶ 3, 4, 8.) As previously noted by the Court, the only claims that are not released are related to the Settlement Agreement and conduct of the parties afterwards. (See 4/29/2022 Minute Order.) As a result, the interest rates related to the loan agreements and the deeds of trust are irrelevant to this claim. The interest rate in the Settlement Agreement is 8% per annum. (FAC, Exh. D at ¶ 1.) The Settlement Agreement provides: “Should any payment not be received within ten days of the due date, a $30.00 per day late fee shall be added to the delinquent payment, up to a maximum of 6% of the total delinquent payment.” (FAC, Exh. D at ¶ 1.) These interest rates do not exceed the statutory maximum. Accordingly, the demurrer as to the first cause of action is sustained with 15 days leave to amend.
Breach of Contract (Second Cause of Action)
“To prevail on a cause of action for breach of contract, the plaintiff must prove (1) the contract, (2) plaintiff's performance of the contract or excuse for nonperformance, (3) defendant's breach, and (4) resulting damage to the plaintiff.” (Richman v. Hartley (2014) 224 Cal.App.4th 1182, 1186; CACI no. 303.)
Here, the FAC alleges that Defendants have breached the “Loan Agreements, 2019 Lawsuit Settlement Agreement, 2016 Deed of Trust, 2018 Deed of Trust . . .” (FAC, at ¶ 29.) “Defendant breached these various agreements by failing to provide an accurate Payoff Demand to Plaintiff, demanding excessive and unwarranted interest, fees and charges, and by recording the Notice of Sale on December 21, 2021.” (FAC, at ¶ 31.) The FAC does not allege that the Settlement Agreement has a provision requiring a payoff demand. The FAC also does not allege that Defendants charged more interest than agreed to in the Settlement Agreement. The FAC does not allege how the recording of the Notice of Sale has breached the Settlement Agreement. The Settlement Agreement provides that the Deeds of Trust on the Subject Property “shall remain as evidence of this debt up to $218,000.00 total”. To the extent Plaintiff believes that the Notice of Sale is a breach of the Settlement Agreement because of this limit, Plaintiff has not alleged damages as a result of this alleged breach. The demurrer as to the second cause of action is sustained with 15 days leave to amend.
Declaratory Relief (Third Cause of Action)
The elements of declaratory relief are (1) a person interested under a written instrument, (2) actual controversy, and (3) a request for a declaration of rights and duties. (Code Civ. Proc., § 1060; Cardellini v. Casey (1986) 181 Cal. App. 389, 395.)
Here, the FAC does not allege an actual controversy that this Court needs to resolve. Rather, Plaintiff asks the court to “clarify Plaintiff’s obligations and responsibilities, and the obligations and responsibilities of Defendant, under the alleged Loan Agreements, 2016 Deed of Trust, 2018 Deed of Trust, 2019 Lawsuit Settlement Agreement and related agreements.” (FAC, at ¶ 35.) The demurrer as to the third cause of action is sustained with 15 days leave to amend.
Accounting (Fourth Cause of Action)
An action for accounting is not available where the plaintiff alleges the right to recover a sum certain or a sum that can be made certain by calculation. (St. James Church of Christ Holiness v. Superior Court (1955) 135 Cal.App.2d 352, 359.) An accounting is a type of disclosure, which is predicated upon the plaintiff’s legal inability to determine how much money, if any, is due from the opposing party. (Teselle v. McLaughlin (2009) 173 Cal.App.4th 156, 180.)
Here, the FAC alleges that “Since the rights and obligations of the parties (if any) have changed, and become confused and convoluted, Plaintiff requests and requires a judicial determination of the respective parties’ interests in the Subject Property (if any)”. (FAC, at ¶ 38.) Plaintiff does not allege that Defendants, or any of them, owe him money. Rather, he acknowledges that he owes Defendant(s) between $200,000.00 and $250,000.00 per the Settlement Agreement. (FAC, at ¶ 20.) A claim for accounting cannot be alleged. Accordingly, the demurrer as to the fourth cause of action is sustained without leave to amend.
Violation of Civil Code Sections 2924 and 2943 (Fifth Cause of Action)
Plaintiff alleges that “Defendant has violated the provisions of Civil Code Sections 2924 and 2943 by failing to give Plaintiff an accurate Payoff Demand for the 2016 Deed of Trust and the 2018 Deed of Trust. Defendant has Plaintiff damages by causing Plaintiff’s December 2021 sale of the Subject Property to fail, and otherwise causing Plaintiff to be unable to be able to sell his Property.” (FAC, at ¶ 40.)
Plaintiff fails to allege what Defendants did to violate either of these statutes. Section 2943 contains timing requirements and content requirements. But Plaintiff fails to cite to any subsection or identify a specific violation. Furthermore, Plaintiff cites no authority for general damages when the sale has not yet occurred. The demurrer as to the fifth cause of action is sustained with 15 days leave to amend.
Equitable Estoppel (Sixth Cause of Action)
Plaintiff seeks a “court judgment determining that Defendants are equitably estopped from asserting any errant, unwarranted, or overstated charges (including improper interest) against Plaintiff’s Property based on Defendant’s 2016 Trust Deed, 2018 Trust Deed, or otherwise, based on the totality of the transactions and dealings between the parties as alleged herein.” (FAC, at ¶ 43.)
A stand-alone cause of action for equitable estoppel will not lie as a matter of law. (Behnke v. State Farm General Ins. Co. (2011) 196 Cal.App.4th 1443, 1463; Central National Ins. Co. v. Cal. Ins. Guarantee Assn. (1985) 165 Cal.App.3d 453, 460 [equitable estoppel must be pleaded either as a part of the cause of action or as a defense].) Thus, the demurrer as to the sixth cause of action is sustained without leave to amend.
Promissory Estoppel (Seventh Cause of Action)
The elements of a cause of action for promissory estoppel are (1) a promise, (2) the reasonable expectation by the promisor that the promise will induce reliance or forbearance, (3) actual reliance or forbearance, and (4) the avoidance of injustice by enforcing the promise. (Kajima/Ray Wilson v. Los Angeles County Metropolitan Transportation Authority (2000) 23 Cal.4th 305, 310.) If actual consideration was given by the promisee, promissory estoppel does not apply. (Fleet v. Bank of America N.A. (2014) 229 Cal.App.4th 1403, 1413, citing Youngman v. Nevada Irrigation Dist. (1969) 70 Cal.2d 240.)
Here, Plaintiff alleges that “Defendants failed to provide an accurate Payoff Demand to Plaintiff for Defendant’s 2016 Trust Deed and 2018 Trust Deed, which Defendants failed to do.” (FAC, at ¶ 48.) Plaintiff points to contracts, not promises without consideration. Plaintiff received consideration for the Settlement Agreement. Moreover, Plaintiff also fails to allege reliance or forbearance. Thus, the demurrer as to the seventh cause of action is sustained with 15 days leave to amend.
Fraud (Eighth Cause of Action)
The tort of fraud (deceit) requires a misrepresentation, knowledge of falsity, intent to induce reliance, reliance, causation and resulting damages. (Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 990; Lazar v. Superior Court (1996) 12 Cal.4th 631, 638; Behnke v. State Farm Gen. Ins. Co., supra, 196 Cal.App.4th at pp. 1452-1453.) Fraud must be pleaded specifically. To survive demurrer, plaintiff must plead facts that “show how, when, where, to whom, and by what means the representations were tendered.” (Hamilton v. Greenwich Investors XXVI, LLC (2011) 195 Cal.App.4th 1602, 1614 [internal quotes omitted]; Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.)
There are no facts alleged in this claim – only legal conclusions. (See FAC, at ¶¶ 51-60.) It is unclear from the FAC what representations Plaintiff is alleging. But even if the alleged misrepresentation is contained in the payoff demand, Plaintiff still has not alleged reliance and causation to any damages resulting from that reliance. Thus, the demurrer as to the eighth cause of action is sustained with 15 days leave to amend.
Negligent Misrepresentation (Ninth Cause of Action)
Negligent misrepresentation occurs where the maker of the statement lacks “reasonable ground for believing it to be true.” (Civ. Code, § 1710, subd. (2); see also Civ. Code, § 1572, subd. (2)). For this claim too, a plaintiff must plead and prove facts showing their actual and justifiable reliance on the false statement. (Mirkin v. Wasserman (1993) 5 Cal.4th 1082, 1089, 1095, fn. 2; Garcia v. Superior Court (1990) 50 Cal.3d 728, 737.) The plaintiff “actually” relies on a misrepresentation when it plays a substantial role in influencing plaintiff's actions—i.e., but for the representation, plaintiff would likely not have behaved in the same way. (Conroy v. Regents of Univ. of Calif. (2009) 45 Cal.4th 1244, 1256.)
Like the fraud claim, there are no facts alleged in this claim – only legal conclusions. (See FAC, at ¶¶ 62-65.) Even if the court construes the payoff demand as the negligent representation, there are no allegations of actual reliance. Thus, the demurrer as to the ninth cause of action is sustained with 15 days leave to amend.
Financial Elder Abuse (Tenth Cause of Action)
The elements of elder abuse are (1) a person takes, secretes, appropriates, obtains, or retains real or personal property of an elder for a wrongful use or with intent to defraud, or both. (Kerley v. Weber (2018) 27 Cal.App.5th 1187, 1194 [citing Welf. & Inst. Code, § 15610.30, subd. (a)(l)].) An elder is any California resident over 65 years old. (Kerley v. Weber, supra, 27 Cal.App.5th at p. 1194 [citing Welf. & Inst. Code, § 15610.27].)
Here, the FAC fails to allege Plaintiff’s age. The FAC also fails to allege that Defendants took any money from him for a wrongful use or with intent to defraud. On the contrary, the FAC alleges that Plaintiff owes Defendants money pursuant a negotiated Settlement Agreement wherein he was represented by counsel. Thus, the demurrer as to tenth cause of action is sustained with 15 days leave to amend.
Quiet Title (Eleventh Cause of Action)
The complaint in a quiet title action must contain the following: a description of the property that is the subject of the action; the title of the plaintiff as to which a determination is sought and the basis of the title, including the specific facts constituting adverse possession of the property if that is the basis of the plaintiff's title; the specific adverse claims to the title of the plaintiff against which a determination is sought; the date as of which the determination is sought; and a prayer for the determination of the title of the plaintiff against the adverse claims. (Civ. Code Proc., § 761.020, subds. (a)-(e).) A quiet title action requires “antagonistic property interest[s].” (Friends of the Trails v. Blasius (2000) 78 Cal.App.4th 810, 831.) In other words, a plaintiff cannot obtain a quiet title judgment unless someone claims a conflicting interest in the same property as the plaintiff. (Ibid.) Furthermore, a borrower may not quiet title against a secured lender without first paying the outstanding debt on which the mortgage or deed of trust is based; the cloud on title remains until the debt is paid. (Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 86.)
Plaintiff alleges that the “title to the Property is vested in Plaintiff alone”. (FAC, at ¶ 75.) Here, the FAC is verified by counsel because Plaintiff is “presently unavailable”. (FAC, at p. 14, Verification.) Counsel asserts: “I have read the above document and know its contents. I am informed and believe and on that ground allege that the matters stated in it are true.” (FAC, at p. 14, Verification.) Nevertheless, Plaintiff does not dispute the validity of most of the lien amount.
Finally, Plaintiff lacks standing to challenge a new servicer. (See FAC, at ¶ 73.) When the assignment of a loan is merely voidable, only the parties to the assignment have the power to ratify or avoid the contract. In other words, the transaction is not void unless and until one of those parties takes steps to make it so. (Yvanova v. New Century Mortg. Corp. (2016) 62 Cal.4th 919, 924, 936.) Thus, the demurrer as to the eleventh cause of action is sustained with 15 days leave to amend.
Violation of Business & Professions Code § 17200 (Twelfth Cause of Action)
Business and Professions Code section 17200 prohibits “any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising.” Under the unlawful prong, a violation of law may be actionable as unfair competition under Business & Professions Code section 17200. (Lueras v. BAC Home Loans Servicing, LP, supra, 221 Cal.App.4th at p. 81.) “An unfair business practice occurs when that practice offends an established public policy or when the practice is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers . . . An unfair business practice also means the public policy which is a predicate to the action must be tethered to specific constitutional, statutory or regulatory provisions.” (Ibid. [internal citations omitted].) A fraudulent practice “require[s] only a showing that members of the public are likely to be deceived and can be shown even without allegations of actual deception, reasonable reliance and damage.” (Ibid. [internal citations omitted].) A UCL claim “must be stated with reasonable particularity, which is a more lenient pleading standard than is applied to common law fraud claims.” (Gutierrez v. Carmax Auto Superstores California (2018) 19 Cal.App.5th 1234, 1261.)
Plaintiff alleges that “[t]he above-described unlawful, fraudulent, or unfair business acts and practices conducted by Defendants continue to this day and present a threat to Plaintiff and/or members of the general public in this Defendant has failed to publicly acknowledge the wrongfulness of its actions and provide frill equitable injunctive and monetary relief as required by statute.” (FAC, at ¶ 80.) Given that the FAC failed to state sufficient facts to allege causes of action for the first eleven causes of action, Plaintiff did not allege sufficient facts to show an unlawful, fraudulent, or unfair business practice. The demurrer as to the twelfth cause of action is sustained with 15 days leave to amend.
Defendants shall give notice of the ruling.
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