Judge Donald F. Gaffney, Case Valencia v. Pacific Bay Lending group 2022-08-03 Tentative Ruling

Judge: Donald F. Gaffney, Case: Valencia v. Pacific Bay Lending group, Date: 2022-08-03 Tentative Ruling

TENTATIVE RULING

Demurrer to First Amended Complaint (The Garcia FAC)

Defendants John Martinez and JDM Data, Inc. (“Demurring Defendants”) demur to the first through fourth causes of action in the First Amended Complaint filed by Plaintiff Byron Rene Garcia Gonzalez (“Garcia FAC”). For the following reasons, the demurer is OVERRULED as to the first and fourth causes of action and SUSTAINED with leave to amend as to the second and third causes of action.

A demurrer challenges the defects appearing on the face of the pleading or from other matters properly subject to judicial notice. (See Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) A demurrer challenges only the legal sufficiency of the affected pleading, not the truth of the factual allegations in the pleading or the pleader’s ability to prove those allegations. (Cundiff v. GTE Cal., Inc. (2002) 101 Cal.App.4th 1395, 1404-1405.) Questions of fact cannot be decided on demurrer. (Berryman v. Merit Prop. Mgmt., Inc. (2007) 152 Cal.App.4th 1544, 1556.) Because a demurrer tests only the sufficiency of the complaint, a court will not consider facts that have not been alleged in the complaint unless they may be reasonably inferred from the matters alleged or are proper subjects of judicial notice. (Hall v. Great W. Bank (1991) 231 Cal.App.3d 713, 718 n.7.)

Under Section 430.10(e) the test is whether the complaint states any valid claim entitling plaintiff to relief, even if plaintiff’s cause of action is improperly titled, or an improper remedy is stated. (See Quelimane Co., Inc. v. Stewart Title Guar. Co. (1998) 19 Cal.4th 26, 38, and Town Council, Inc. v. City of Los Angeles (1996) 47 Cal.App.4th 1547.) Hence, under a general demurrer, plaintiff’s complaint must fail to state a valid cause of action for the demurrer to be sustained.

First Cause of Action for Declaratory Relief

On March 16, 2018, Plaintiff and Defendants closed a refinance in the amount of $358,923.00 for the property located at 1253 East 92nd Street, Los Angeles, California 90002 (“Mortgage Loan Contract”). (Garcia FAC ¶ 17.) The Garcia FAC alleges that a dispute has arisen between Plaintiff and Defendants. (Garcia FAC ¶ 15.) Plaintiff alleges that Defendants willfully violated multiple provisions of the California Finance Code and refuse to void the Mortgage Loan Contract. (Garcia FAC ¶¶ 16-18.) Plaintiff seeks a declaratory judgment holding that the Mortgage Loan Contract is void and ordering each of the Defendants to refund any principal, charges, or recompense that they received in connection with the subject Mortgage Loan Contract. (Garcia FAC ¶ 18.)

Code of Civil Procedure section 1060 permits independent claims for declaratory relief and provides, in relevant part: “Any person interested under a written instrument ... or under a contract, or who desires a declaration of his or her rights or duties with respect to another ... may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an original action or cross-complaint in the superior court for a declaration of his or her rights and duties in the premises, including a determination of any question of construction or validity arising under the instrument or contract. He or she may ask for a declaration of rights or duties, either alone or with other relief; and the court may make a binding declaration of these rights or duties, whether or not further relief is or could be claimed at the time.... The declaration may be had before there has been any breach of the obligation in respect to which said declaration is sought.” (Code Civ. Proc., § 1060; Ball v. FleetBoston Financial Corp. (2008) 164 Cal.App.4th 794, 800.)

Because Code of Civil Procedure section 1060 permits an original action, and authorizes a claim for declaratory relief to be filed alone, Plaintiff may pursue a claim for declaratory relief in the absence of another cause of action or other requested relief. The Garcia FAC’s allegations establish that Plaintiff is an interested person under a contract and seeks a declaration regarding the validity of the Mortgage Loan Contract. Plaintiff’s claim for declaratory relief relies on Defendants’ alleged violations of the California Financial Code and, thus, are not wholly derivative of their common law fraud and conversion claims. The demurrer to the first cause of action is OVERRULED.

Second Cause of Action for Constructive Fraud

“The elements of the cause of action for constructive fraud are: (1) fiduciary relationship; (2) nondisclosure (breach of fiduciary duty); (3) intent to deceive, and (4) reliance and resulting injury (causation).” (Younan v. Equifax Inc. (1980) 111 Cal.App.3d 498, 516 fn. 14.) “Constructive fraud consists: [¶] 1. In any breach of duty which, without an actually fraudulent intent, gains an advantage to the person in fault, or any one claiming under him, by misleading another to his prejudice, or to the prejudice of any one claiming under him; or, [¶] 2. In any such act or omission as the law specially declares to be fraudulent, without respect to actual fraud.” (Civ. Code, § 1573.) “A breach of a fiduciary duty usually constitutes constructive fraud. [Citation.] Constructive fraud, like actual fraud, must be pleaded with specificity. [Citation.]”
(Knox v. Dean (2012) 205 Cal.App.4th 417, 434; see also Schauerv. Mandarin Gems of California, Inc. (2005) 125 Cal.App.4th 989, 960-961 [every element of a fraud cause of action must be alleged with factual specificity, and the policy of liberal construction of pleading will not be invoked.].)

The second cause of action for constructive fraud alleges Defendants agreed to and acted in a confidential and fiduciary relationship relative to Plaintiff, acted as Plaintiff’s agents relative to his loan acquisition and escrow, and the nature of the relationship was such that the Plaintiff was required to rely on the honesty and integrity of the Defendants; that Defendants deceived Plaintiff about the reasons, terms, conditions and legality of the subject “Mortgage Loan Contract”, as well as engaged in unlawful business practices, such as misrepresenting their authority and license status; and that Plaintiff was damaged as a direct and proximate result of Defendants’ breach of duty. (Garcia FAC ¶¶ 21-22.)

The Garcia FAC further alleges that Defendant Marc Martinez solicited a refinance from Plaintiff by representing that he was a licensed Loan Originator authorized by and working for various refinance companies, and proceeded to offer the subject loan, negotiate the terms of the subject loan and took the application for the subject loan. (Garcia FAC ¶ 22.) The Garcia FAC alleges that Plaintiffs established a fiduciary relationship with Defendants Bay-Valley Mortgage Group, West One Capital Group, Inc., Vision One Mortgage, Inc., Marc Martinez, Burt F. Holland, and John Martinez and that Bay-Valley Mortgage Group and West One Capital Group, paid Marc Martinez illegal commissions. (Garcia FAC ¶ 22.)

The Garcia FAC also alleges that JDM Data, Inc. is a marketing company, owned by John Martinez, and is used by Bay-Valley Mortgage Group and John Martinez to illegally pay Marc Martinez. (Garcia FAC ¶ 15.) The Garcia FAC alleges that Marc Martinez represented to Plaintiffs that he was a licensed Loan Officer from Bay-Valley Mortgage Group, West One Capital Group, Inc., and Vision One Mortgage Inc. and that Marc Martinez does business as a licensed loan officer for Bay-Valley Mortgage Group, West One Capital Group, Inc., and Vision One Mortgage Inc. (Garcia FAC ¶¶ 5, 13, 22.)

The Garcia FAC does not allege other facts that specify an actual relationship between Marc Martinez, Bay-Valley Mortgage Group, West One Capital Group, Inc., and Vision One Mortgage Inc., John Martinez, and JDM Data, Inc.

The demurrer is SUSTAINED with leave to amend as to the second cause of action. The Garcia FAC does not plead sufficient facts to allege a fiduciary relationship between Demurring Defendants and Plaintiffs.

Third Cause of Action for Conversion

“Conversion is the wrongful exercise of dominion over the property of another. The elements of a conversion claim are: (1) the plaintiff’s ownership or right to possession of the property; (2) the defendant’s conversion by a wrongful act or disposition of property rights; and (3) damages....” (Lee v. Hanley (2015) 61 Cal.4th 1225, 1240 (citation and internal quotation marks omitted].) “[C]onversion is a strict liability tort. It does not require bad faith, knowledge, or even negligence; it requires only that the defendant have intentionally done the act depriving the plaintiff of his or her rightful possession.” (Voris v. Lampert (2019) 7 Cal.5th 1141, 1158 [citation omitted].) “[A] mere contractual right of payment, without more, will not suffice” for a conversion claim. (Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 445, 452.)

Plaintiff’s cause of action for conversion alleges Plaintiff had a right to the immediate possession of all of the principal, charges, or recompense that each of the Defendants has been paid or will be paid in connection with the Mortgage Loan Contract, including the payments on the Mortgage Loan Contract. (Garcia FAC ¶ 28.) Plaintiff further alleges that Defendants interfered with Plaintiff’s right to immediate possession of the money by making false representations and concealing the true facts, took Plaintiff’s money, and refused to return it. (Garcia FAC ¶¶ 28-31.)

The Garcia FAC sufficiently pleads that the Mortgage Loan Contract is void because of Marc Martinez’s alleged violation of the California Finance Code, that the contract has been rescinded by Plaintiffs, and that Defendants, including Demurring Defendants, have kept the money at issue. (Garcia FAC ¶ 16, 28.] However, under California law, where a statute creates a right that did not exist at common law and provides a comprehensive and detailed remedial scheme for its enforcement, the statutory remedy is exclusive. (Rojo v. Kliger (1990) 52 Cal.3d 65, 79.)

Here, the allegations in the Garcia FAC seek relief based on the California Financial Code, and the Financial Code provides a remedial scheme for violation of its provisions. Thus, Plaintiff is limited to the remedies provided by statute and may not separately allege a tort claim for conversion. The demurrer is SUSTAINED with leave to amend as to the third cause of action.

Fourth Cause of Action for Unfair Competition Law (Business & Professions Code Section 17200)

Plaintiff alleges that Defendants violated provisions of the California Finance Code, including section 22100, which mandates every licensee engaging in the business of making or brokering residential mortgage loans to require every mortgage loan originator employed or compensated by that licensee to obtain and maintain a mortgage loan originator license from the commissioner; and section 50124, which prohibits employing or paying a commission to a mortgage loan originator who does not hold a valid license. (Garcia FAC ¶ 16.) Plaintiffs further allege that Bay-Valley Mortgage Group, West One Capital Group, Inc., and Vision One Mortgage Inc. paid Marc Martinez illegal commissions by using JDM Data, Inc. as an intermediary. (Id.) Plaintiff also alleges that each of the Defendants was the agent, servant, owner, representative, alter-ego, successor-in-interest, predecessor-in-interest, joint-venturer, co-conspirator or employee of each of the other. (Garcia FAC ¶ 11.)

California’s UCL creates a cause of action for business practices that are (1) unlawful, (2) unfair, or (3) fraudulent. (Bus. & Prof. Code § 17200.) “Although remedies under the [UCL] are limited to injunctive relief and restitution, the law’s scope is ‘sweeping.’” (Cel–Tech Commc’ns, Inc. v. Los Angeles Cellular Tel. Co. (1999) 20 Cal.4th 163, 180.) Moreover, each prong of the UCL provides a separate and distinct theory of liability. (South Bay Chevrolet v. Gen. Motors Acceptance Corp. (1999) 72 Cal.App.4th 861.) Here, Plaintiff alleges violation of the UCL’s unlawfulness prong. The demurrer is OVERRULED as to the fourth cause of action on this ground.

Should Plaintiff desire to file an amended complaint that addresses the issues in this ruling, Plaintiff must file and serve it within 15 days of service of notice of ruling. Plaintiff is reminded that the scope of amendment is limited. (Community Water Coalition v. Santa Cruz County Local Agency Formation Com. (2011) 200 Cal.App.4th 1317, 1329.)

Demurring Defendants to give notice.

TENTATIVE RULING

Motion to Strike Portions of First Amended Complaint (The Garcia FAC)

Defendants John Martinez and JDM Data, Inc. (“Moving Defendants”) move to strike the entirety of the First Amended Complaint filed by Plaintiff Byron Rene Garcia Gonzalez (“Garcia FAC”). Moving Defendants also move to strike Plaintiff’s claim for punitive damages. For the following reasons, Moving Defendants’ motion is DENIED.

A party may move to strike a pleading pursuant to Code of Civil Procedure section 435. In turn, Code of Civil Procedure section 436 provides that a court may strike (a) “any irrelevant, false, or improper matter” in a pleading, or strike (b) all or any part of a pleading “not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court.”

Moving Defendants contend that the Garcia FAC should be stricken in its entirety as it pertains to Moving Defendants because the Garcia FAC is “confusing, redundant, and unclear as to which facts are relevant to which Defendant.” (Motion at 3:23-24.) Because a demurrer is the more suitable vehicle to address this uncertainty argument, the motion to strike is denied. (See Code Civ. Proc., § 430.10(f).) Nevertheless, errors and confusion created by “the inept pleader” are to be forgiven if the pleading contains sufficient facts entitling plaintiff to relief. (Saunders v. Cariss (1990) 224 Cal. App. 3d 905, 908.) Any “ambiguities can be clarified under modern discovery procedures.” (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.)

In light of the court’s concurrent ruling to sustain Moving Defendants’ demurrer to the second and third causes of action with leave to amend, the motion to strike Plaintiff’s punitive damages claim is also denied as moot.

Plaintiff to give notice.

TENTATIVE RULING

Demurrer to First Amended Complaint (The Lopez-Avila FAC)

Defendants John Martinez and JDM Data, Inc. (“Demurring Defendants”) demur to the first through fourth causes of action in the First Amended Complaint filed by Plaintiffs Leticia Lopez and Pedro Avila (“Lopez-Avila FAC”). For the following reasons, the demurer is OVERRULED as to the first and fourth causes of action and SUSTAINED with leave to amend as to the second and third causes of action.

Because a demurrer tests only the sufficiency of the complaint, a court will not consider facts that have not been alleged in the complaint unless they may be reasonably inferred from the matters alleged or are proper subjects of judicial notice. (Hall v. Great W. Bank (1991) 231 Cal.App.3d 713, 718 n.7.)

First Cause of Action for Declaratory Relief

On May 17, 2018, Plaintiffs and Defendants closed a refinance in the amount of $314,000 for the property located at 138 East Cypress Street, Compton, California 90220 (“Mortgage Loan Contract”). (Lopez-Avila FAC ¶ 10.) The Lopez-Avila FAC alleges that a dispute has arisen between Plaintiffs and Defendants. (Lopez-Avila FAC ¶ 11.) Plaintiffs allege that Defendants willfully violated multiple provisions of the California Finance Code and refuse to void the Mortgage Loan Contract. (Lopez-Avila FAC ¶¶ 11-13.) Plaintiffs seek a declaratory judgment holding that the Mortgage Loan Contract is void and ordering each of the Defendants to refund any principal, charges, or recompense that they received in connection with the subject Mortgage Loan Contract. (Lopez-Avila FAC ¶ 14.)

Because Code of Civil Procedure section 1060 permits an original action, and authorizes a claim for declaratory relief to be filed alone, Plaintiffs may pursue a claim for declaratory relief in the absence of another cause of action or other requested relief. The Lopez-Avila FAC’s allegations establish that Plaintiffs are interested persons under a contract and seek a declaration regarding the validity of the Mortgage Loan Contract. Plaintiffs’ claim for declaratory relief relies on Defendants’ alleged violations of the California Financial Code and, thus, are not wholly derivative of their common law fraud and conversion claims. The demurrer to the first cause of action is OVERRULED.

Second Cause of Action for Constructive Fraud

The second cause of action for constructive fraud alleges Defendants agreed to and acted in a confidential and fiduciary relationship relative to Plaintiffs, acted as Plaintiffs’ agents relative to their loan acquisition and escrow, and the nature of the relationship was such that the Plaintiffs were required to rely on the honesty and integrity of the Defendants; that Defendants deceived Plaintiffs about the reasons, terms, conditions and legality of the subject “Mortgage Loan Contract”, as well as engaging in unlawful business practices, such as misrepresenting their authority and license status; and that Plaintiffs were damaged as a direct and proximate result of Defendants’ breach of duty. (Lopez-Avila FAC ¶¶ 17-18.)

The Lopez-Avila FAC further alleges that Defendant Rosalie Felix solicited a refinance from Plaintiffs by representing that she was a licensed Loan Originator authorized by and working for Defendant Bay-Valley Mortgage Group, and proceeded to offer the subject loan, negotiate the terms of the subject loan and took the application for the subject loan. (Lopez-Avila FAC ¶ 17.) The Lopez-Avila FAC alleges that Plaintiffs established a fiduciary relationship with Defendant Bay-Valley Mortgage Group, Felix, and John Martinez and that Bay-Valley Mortgage Group and West One Capital Group presumably paid Felix illegal commissions. (Lopez-Avila FAC ¶¶ 17-18.)

The Lopez-Avila FAC also alleges that JDM Data, Inc. is a marketing company, owned by John Martinez, and is used by Bay-Valley Mortgage Group and John Martinez to illegally pay Felix. (Lopez-Avila FAC ¶¶ 5, 25.) The Lopez-Avila FAC alleges that Felix represented to Plaintiffs that she was a licensed Loan Officer from Bay-Valley Mortgage Group and that Felix does business as a licensed loan officer for Bay-Valley Mortgage Group. (Lopez-Avila FAC ¶¶ 3, 7.)

The Lopez-Avila FAC does not allege other facts that specify an actual relationship between Felix and Bay-Valley Mortgage Group, John Martinez, and JDM Data, Inc.

The demurrer is SUSTAINED as to the second cause of action with leave to amend. The Lopez-Avila FAC does not plead sufficient facts to allege a fiduciary relationship between Demurring Defendants and Plaintiffs.

Third Cause of Action for Conversion

Plaintiffs’ cause of action for conversion alleges Plaintiffs had a right to the immediate possession of all of the principal, charges, or recompense that each of the Defendants has been paid or will be paid in connection with the Mortgage Loan Contract, including the payments on the Mortgage Loan Contract. (Lopez-Avila FAC ¶ 24.) Plaintiffs further allege that Defendants interfered with Plaintiffs’ right to immediate possession of the money by making false representations and concealing the true facts, took Plaintiffs’ money, and refused to return it. (Lopez-Avila FAC ¶ 24.)

The Lopez-Avila FAC sufficiently pleads that the Mortgage Loan Contract is void because of Felix’s alleged violation of the California Finance Code, that the contract has been rescinded by Plaintiffs, and that Defendants, including Moving Defendants, have kept the money at issue. (Lopez-Avila FAC ¶¶ 12, 24.] However, under California law, where a statute creates a right that did not exist at common law and provides a comprehensive and detailed remedial scheme for its enforcement, the statutory remedy is exclusive. (Rojo v. Kliger (1990) 52 Cal.3d 65, 79.)

Here, the allegations in the Lopez-Avila FAC seek relief based on the California Financial Code, and the Financial Code provides a remedial scheme for violation of its provisions. Thus, Plaintiffs are limited to the remedies provided by statute and may not separately allege a tort claim for conversion. The demurrer is SUSTAINED with leave to amend as to the third cause of action.

Fourth Cause of Action for Unfair Competition Law (Business & Professions Code Section 17200)

Plaintiffs allege that Defendants violated provisions of the California Finance Code, including: section 22100 which mandates every licensee engaging in the business of making or brokering residential mortgage loans to require every mortgage loan originator employed or compensated by that licensee to obtain and maintain a mortgage loan originator license from the commissioner; and section 50124 which prohibits employing or paying a commission to a mortgage loan originator who does not hold a valid license. (Lopez-Avila FAC § 12.) Plaintiffs further allege that Bay-Valley Mortgage Group paid Felix illegal commissions by using JDM Data, Inc. as an intermediary. (Id.) Plaintiffs also allege that each of the Defendants was the agent, servant, owner, representative, alter-ego, successor-in-interest, predecessor-in-interest, joint-venturer, co-conspirator or employee of each of the other. (Lopez-Avila FAC § 6.)

California’s UCL creates a cause of action for business practices that are (1) unlawful, (2) unfair, or (3) fraudulent. (Bus. & Prof. Code § 17200.) “Although remedies under the [UCL] are limited to injunctive relief and restitution, the law’s scope is ‘sweeping.’” (Cel–Tech Commc’ns, Inc. v. Los Angeles Cellular Tel. Co. (1999) 20 Cal.4th 163, 180.) Moreover, each prong of the UCL provides a separate and distinct theory of liability. (South Bay Chevrolet v. Gen. Motors Acceptance Corp. (1999) 72 Cal.App.4th 861.) Here, Plaintiffs allege violation of the UCL’s unlawfulness prong. The demurrer is OVERRULED as to the fourth cause of action on this ground.

Should Plaintiffs desire to file an amended complaint that addresses the issues in this ruling, Plaintiffs must file and serve it within 15 days of service of notice of ruling. Plaintiffs are reminded that the scope of amendment is limited. (Community Water Coalition v. Santa Cruz County Local Agency Formation Com. (2011) 200 Cal.App.4th 1317, 1329.)

Demurring Defendants to give notice.

TENTATIVE RULING

Motion to Strike Portions of First Amended Complaint (The Lopez-Avila FAC)

Defendants John Martinez and JDM Data, Inc. (“Moving Defendants”) move to strike the entirety of the First Amended Complaint filed by Plaintiffs Leticia Lopez and Pedro Avila (“Lopez Avila FAC”). Moving Defendants also move to strike Plaintiffs’ claim for punitive damages. For the following reasons, Moving Defendants’ motion is DENIED.

Moving Defendants contend that the Lopez-Avila FAC should be stricken in its entirety as it pertains to Moving Defendants because the Lopez-Avila FAC is “confusing, redundant, and unclear as to which facts are relevant to which Defendant.” (Motion at 3:23-24.) Because a demurrer is the more suitable vehicle to address this uncertainty argument, the motion to strike is denied. (See Code Civ. Proc., § 430.10(f).) Nevertheless, errors and confusion created by “the inept pleader” are to be forgiven if the pleading contains sufficient facts entitling plaintiff to relief. (Saunders v. Cariss (1990) 224 Cal. App. 3d 905, 908.) Any “ambiguities can be clarified under modern discovery procedures.” (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.)

In light of the court’s concurrent ruling to sustain Moving Defendants’ demurrer to the second and third causes of action with leave to amend, the motion to strike Plaintiffs’ punitive damages claim is also denied as moot.

Moving Defendants to give notice.