Judge: Douglas W. Stern, Case: 23STCV06669, Date: 2023-08-04 Tentative Ruling
Case Number: 23STCV06669 Hearing Date: August 4, 2023 Dept: 68
Hawshon Riley, et al. vs
Rushmore Loan Management Service.; Case No. 23STCV06669
MOVING PARTY: Rushmore Loan Management
Service
RESPONDING PARTIES: Hawshon Riley and Dagny
Riley
Demurrer to Complaint with Motion to Strike
I.
BACKGROUND
Plaintiffs Hawshon Riley and Dagny
Riley (Plaintiffs) filed a complaint against Defendant Rushmore Loan Management
Service (Defendant). The Complaint alleges three causes of action for (1) violation
of Civ. Code § 2923.6, (2) violation of the covenant of good faith and fair
dealing, (3) violation of California Business and Professions Code § 17200 et
seq and § 17500 et seq.
The basis of Plaintiffs’ Complaint
is that they were in the process of seeking a home loan modification with
Defendant and had even filed a complete application for loan modification, when
Defendant began the process to sell the house via a Trustee Sale. Plaintiffs
allege that this is a violation of Civ. Code § 2923.6. Further, Plaintiffs
allege in their Complaint that Defendant is withholding $89,000 worth of
insurance proceeds that Plaintiffs should have gotten after there was a fire in
the house.
Defendant filed this demurrer on June
16, 2023. Plaintiffs oppose.
The Court grants Defendant’s Request for Judicial Notice except for item
5, the “Missing Exhibit “B” from Complaint – Rushmore to Riley letter dated February
6, 2023, regarding short sale program.”
(In addition, The Court notes that no Exhibits were attached to the Complaint
although the verified complaint stated that exhibits A and B were attached.)
II. ANALYSIS
A. The Demurrer
As a
general matter, 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 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.) The only issue a demurrer is
concerned with is whether the complaint, as it stands, states a cause of
action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.)
Where a
demurrer is sustained, leave to amend must be allowed where there is a
reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.) The burden is on the
plaintiff to show the court that a pleading can be amended successfully. (Id.; Lewis v. YouTube, LLC
(2015) 244 Cal.App.4th 118, 226.) However, “[i]f there is any reasonable
possibility that the plaintiff can state a good cause of action, it is error to
sustain a demurrer without leave to amend.” (Youngman v. Nevada Irrigation Dist. (1969) 70 Cal.2d 240, 245).
1.
First
Cause of Action for Violation of Civ. Code § 2923.6
Defendant demurs to the First Cause of Action on the
basis that it fails to state facts sufficient to constitute a cause of action
against Defendant and is uncertain.
Plaintiffs’ Complaint identifies an Exhibit A and
Exhibit B; however, these Exhibits were not attached to the Complaint. On this
basis alone, the Court will sustain the demurrer to this cause of action.
Defendant’s demurrer to Plaintiffs’ First Cause of
Action is sustained with leave to amend.
2.
Second
Cause of Action Violation of the Covenant of Good Faith and Fair Dealing
Defendant demurs to the Second Cause of Action on
the basis that it fails to state facts sufficient to constitute a cause of
action against Defendant and is uncertain.
Every contract includes an implied covenant of good
faith and fair dealing. (Foley v. Interactive Data Corp. (1988) 47
Cal.3d 654, 683–84.) The precise nature and extent of the covenant depends on
the contract. (Id.) Allegations for breach of the covenant must show “a
failure or refusal to discharge contractual responsibilities, prompted not by
an honest mistake, bad judgment or negligence but rather by a conscious and
deliberate act ....” (Careau & Co. v. Sec. Pac. Bus. Credit, Inc.
(1990) 222 Cal.App.3d 1371, 1395.) Such a breach must unfairly frustrate the
agreement’s common purpose and deprive the other party of the contract’s
benefits. (Id.)
While Plaintiffs have alleged that
Defendant acted in bad faith by proceeding with a Trustee Sale and withholding
insurance funds, Plaintiffs have not alleged the contract(s) which Defendant failed
to follow in doing so. Without alleging the contract or its terms, Plaintiffs
cannot maintain this cause of action.
The Court has been asked to take judicial notice of
the Memorandum filed June 8, 2022, in the United States Court of Appeals for
the Ninth Circuit, Case No. 21-55909, Hawshon Riley; Dagny Riley v. Caliber
Home Loans, Inc. et al. That claim
included a claim of breach of the implied covenant of good faith and fair
dealing. It is important that the
pleading of the claim in this new case be clear and appropriately pleaded so
that it may be properly evaluated.
Defendant’s demurrer to Plaintiffs’
Second Cause of Action is sustained with leave to amend.
3.
Third Cause
of Action for Violation of California Business and Professions Code § 17200 et
seq and § 17500 et seq
Defendant demurs to the Third Cause of Action on the
basis that is fails to state facts sufficient to constitute a cause of action
against Defendant and is uncertain.
California Business and Professions Code 17200
defines “unfair competition” as: any unlawful, unfair or fraudulent business
act or practice, or false, deceptive or misleading advertising. (See Bank of
the West v. Superior Court (1992) 2 Cal.4th 1254; see also Business
and Professions Code 17200.) A business practice violates the unlawful, unfair
or fraudulent prong if it is forbidden by law or is against public policy. (Id.)
Almost any violation of the law can serve as the basis for an unfair
competition claim if, as a result of the unfair competition if: it harms
consumers, or it gives a business an unfair advantage over its competitors. (Id.)
Defendants’ demurrer to Plaintiffs’ Third Cause of
Action is sustained with leave to amend.
B. Motion to Strike
Defendant has moved for the Court to strike Plaintiffs’
request for Punitive Damages in Paragraph 5 of the Prayer for Relief of the
Complaint. Plaintiffs have not opposed this motion, and in reviewing the
Complaint, there appears to be no basis for the motion, as there are no
allegations of oppression, fraud, or malice.
Defendant’s motion to strike is granted with leave
to amend.
III. ORDER
1.
Defendant’s demurrer to all the causes of
action is sustained with leave to amend.
2.
Plaintiffs are given 15 days from the date of
service of this order to amend their Complaint.