Judge Edward B. Moreton, Jr., Case Number: 23SMCV04564, Date: 2024-04-22 Tentative Ruling

Judge: Edward B. Moreton, Jr., Case: 23SMCV04564, Date: 2024-04-22 Tentative Ruling

Superior Court of California

County of Los Angeles – West District

Beverly Hills Courthouse / Department 205

SHARON DRIBEN,

Plaintiff,

SERVICEMAC LLC, et al.,

Defendants.

Case No.: 23SMCV04564

Hearing Date: April 22, 2024

[TENTATIVE] ORDER RE:

DEFENDANT’S DEMURRER AND

MOTION TO STRIKE FIRST AMENDED

COMPLAINT

This case arises from a dispute over a loan modification. Plaintiff Sharon Driben obtained a loan in the amount of $453,100 (“Loan”) from Homebridge Financial Services, Inc., which Loan was secured by a Deed of Trust (“DOT”) against the real property located at 10747 Wilshire Blvd #1208, Los Angeles, California (“Property”). Defendant ServiceMac LLC services the loan.

In June 2022, Plaintiff applied for a modification of her mortgage with Defendant. (First Amended Complaint (“FAC”) ¶24.) On or around July 11, 2022, Defendant confirmed receipt of the documents necessary to evaluate her loan modification application. (Id. ¶25.) Yet on July 20, before giving Plaintiff a response to her loan modification application, Defendant recorded a notice of default on Plaintiff’s mortgage and indicated that it was beginning foreclosure proceedings. (Id. ¶26.) Defendant reported this foreclosure status on Plaintiff’s credit reports. (Id. ¶27.) Defendant denied the application on August 26, 2022. (Id. ¶28.)

On or around November 8, 2022, Plaintiff received a new modification offer from Defendant which offered to decrease Plaintiff’s interest rate from 4.875% to 3.5%. (Id. ¶¶ 30-31.) Plaintiff signed, dated, notarized and returned the documents to accept that offer. (Id. ¶32.) Plaintiff alleges that on November 9, 2022, Defendant contacted her authorized representative and told her that the offer had been sent in error and Plaintiff had not been approved for any modification. (Id. ¶33.) She alleges that by the time she was notified of the withdrawal of the offer, she had already accepted the loan modification and signed the documents. (Id. ¶34.) The actual document Plaintiff signed shows she signed and notarized it on November 9, 2022, the same day Defendant told her its offer was sent by mistake. (Ex. 3 to Request for Judicial Notice (“RJN”).)

Plaintiff made timely payments under the loan modification plan. (FAC ¶37.) Despite this, Defendant has refused to honor the terms of the loan modification it offered Plaintiff, and now claims that Plaintiff’s account is delinquent. (Id. ¶¶38-39.) Defendant has indicated that if Plaintiff did not bring her account current, it would begin foreclosure proceedings. (Id. ¶40.)

Defendant reported that Plaintiff’s mortgage was in foreclosure to credit reporting agencies (“CRA”). (Id. ¶¶43, 47.) Defendant’s reporting has resulted in a negative effect on Plaintiff’s credit report and credit score, which has resulted in an inability to obtain credit, reduced credit limits and increased interest rates on existing lines of credit. (Id. ¶¶46, 50, 53(b).)

The operative first amended complaint alleges seven claims for (1) violation of unfair competition law (Bus. & Prof. Code §17200), (2) violation of the California Consumer Credit Reporting Agencies Act (“CCCRAA”) (Cal. Code Civ. Proc. §1785 et seq.), (3) violation of the Fair Credit Reporting Act (“FCRA”) (15 USC §1681 et seq.), (4) violation of the Rosenthal Fair Debt Collection Practices Act (“RFDCPA”) (Cal. Civ. Code §1788 et seq.), (5) violation of the Real Estate Settlement Procedures Act (“RESPA”) (12 U.S.C. §2601 et seq.), (6) breach of contract and (7) common law fraud.

This hearing is on Defendant’s demurrer and motion to strike. Defendant demurs to (1) the CCCRAA and FCRA causes of action because there is no actual allegation of any inaccurate, false or incomplete reporting by Defendant to any CRA, (2) the RFDCPA cause of action because Plaintiff has not alleged facts showing the conduct complained of constituted unfair or deceptive debt collection activities, (3) the RESPA cause of action because Plaintiff did not have a complete loan modification application pending on July 20, 2022 when she claims the notice of default was recorded; (4) the breach of contract claim because there is no contract as Plaintiff concedes her authorized representative was told the offer had been sent to her in error; (5) the fraud cause of action because there is no alleged misrepresentation and Plaintiff in any event could not have relied on Defendant’s erroneous and promptly-withdrawn offer in making her mortgage payments; and (6) the UCL claim because it is derivative of her other claims and must fail for the same reasons as those claims. Defendant also moves to strike Plaintiff’s punitive damages claim because it argues Plaintiff has only made conclusory allegations of malice, oppression and fraud. There was no opposition filed as of the posting of this tentative ruling.

“[A] demurrer tests the legal sufficiency of the allegations in a complaint.” (Lewis v. Safeway, Inc. (2015) 235 Cal.App.4th 385, 388.) A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (See Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994 (in ruling on a demurrer, a court may not consider declarations, matters not subject to judicial notice, or documents not accepted for the truth of their contents).) For purposes of ruling on a demurrer, all facts pleaded in a complaint are assumed to be true, but the reviewing court does not assume the truth of conclusions of law. (Aubry v. Tri-City Hosp. Dist. (1992) 2 Cal.4th 962, 967.)

Further, the court may, upon motion, or at any time in its discretion, and upon terms it deems proper, strike any irrelevant, false, or improper matter inserted in any pleading. (Code Civ. Proc. § 436, subd. (a).) The court may also strike all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court. (Code Civ. Proc. § 436, subd. (b).) The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice. (Code Civ. Proc. § 437.)

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (See Goodman v. Kennedy (1976) 18 Cal.3d 335, 349 (court shall not “sustain a demurrer without leave to amend if there is any reasonable possibility that the defect can be cured by amendment”); Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1037 (“A demurrer should not be sustained without leave to amend if the complaint, liberally construed, can state a cause of action under any theory or if there is a reasonable possibility the defect can be cured by amendment.”).) The burden is on the complainant to show the Court that a pleading can be amended successfully. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)

Code Civ. Proc. §§ 430.41 and 435.5 requires that before the filing of a demurrer or motion to strike, the moving party “shall meet and confer in person or by telephone” with the party who filed the pleading that is subject to demurrer or motion to strike for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer or motion to strike. (Code Civ. Proc. §§ 430.41(a), 435.5(a).) The parties are to meet and confer at least five days before the date the responsive pleading is due. (Code Civ. Proc. §§ 430.41(a)(2), 435.5(a)(2).) Thereafter, the moving party shall file and serve a declaration detailing their meet and confer efforts. (Code Civ. Proc. §§ 430.41(a)(3), 435.5(a)(3).) Defendant submits the Declaration of Jonathan Fink, which avers counsel met and conferred by phone on January 4, 2024, more than 5 days prior to bringing this demurrer and motion to strike. This satisfies the requirements of §§430.41 and 435.5.

CCCRAA and FCRA Claims

The CCCRAA provides that a person “shall not furnish information on a specific transaction or experience to any consumer credit reporting agency if the person knows or should know the information is incomplete or inaccurate.” (Civ. Code § 1785.25(a).) Here, Plaintiff alleges Defendant provided false information that her mortgage was in foreclosure to the CRA, but she concedes she actually was in foreclosure. (FAC ¶¶26, 43.) Her argument appears to be that the foreclosure should not have been initiated because she had a loan modification pending (FAC ¶¶24-26), but this does not mean that Defendant furnished false information. Whether proper or not, Plaintiff was in fact in foreclosure, and to the extent Defendant reported this to the CRA, it was providing accurate information.

As to her FCRA claim, it suffers from the same defects as the claim under the CCCRAA. (Guimond v. Trans Union Credit Info. Co. (9th Cir. 1995) 45 F.3d 1329, 1335 (“The [CCCRAA]¿mirrors provisions¿of the¿FCRA”).) In addition, under the FCRA, to sue a credit furnisher such as Defendant, Plaintiff needs to allege that a timely and proper dispute was made to the credit bureau, in accordance with the provisions of 15 U.S.C. § 1681(a)(2), prior to filing the action, and notice of that dispute was sent from the credit bureau to the furnisher. (Gorman v. Wolpoff & Abramson, LLC (9th Cir. 2009) 584 F.3d 1147, 1154.) Plaintiff has made no allegation of any notice from the credit bureau to Defendant.

Accordingly, the Court sustains the demurrer to the CCCRAA and FCRA claims.

Defendant argues that beyond recitation of the statutory prohibitions in the RFDCPA, Plaintiff has not alleged actual acts or omissions that fall within those prohibitions. The Court agrees.

Plaintiff recites four provisions of the FDCPA, which is incorporated by reference in the RFDCPA: 15 USC §§ 1692(d), 1692e(2)(A), 1692e(5) and 1692e(8). (FAC ¶63.) However, merely citing a statute does not suffice. (See, e.g., Mulato v. Wells Fargo Bank N.A. (N.D. Cal. 2014) 76 F. Supp.3d 929, 955 (dismissing RFDCPA claim for failure to allege facts showing that the conduct complained of constituted unfair or deceptive debt collection activities); James v. Veros Credit (S.D. Cal. 2019) 2019 U.S. Dist LEXIS 241001 at *6-*10 (dismissing claims under §§ 1692e and 1692f, as well as derivative RFDCPA claim, based on complaint’s reliance on vague and conclusory allegations as to the violations); Anderson v. Kimball Tirey & St. John LLP (S.D. Cal. July 9, 2013) 2013 U.S. Dist. LEXIS 209082¿at *8-*9 (“Conclusory statement[s] that [FDCPA violations] occurred without further details is insufficient to survive a motion to dismiss.”); Jackson v. ASA Holdings (D.D.C. 2010) 751 F. Supp.2d 91, 99-100 (finding allegations that “do[] little more than parrot the language of the statute in conclusory fashion” fail to state a FDCPA claim); Green v. Rosenberg & Assocs. LLC (D. Md. Mar. 7, 2018) 2018 U.S. Dist. LEXIS 37021 at *11-*12 (dismissing FDCPA claim because complaint “contain[ed] only conclusory allegations of various acts by [the defendants] that largely parrot the language of the statute without providing specific details”).)

Allegations that Defendant refused to accept performance under a loan modification it had told her was sent to her erroneously before she attempted any performance do not amount to “conduct the natural consequence of which is to harass, oppress or abuse any person in connection with the collection of a debt.” (15 U.S.C. §1692d.) Nor does it constitute falsely representing the character, amount or legal status of Plaintiff’s debt. (15 U.S.C. §1692e(2)(A).) Indeed, Defendant has consistently told Plaintiff that the loan modification offer she sought to accept had been sent to her by accident and would not be honored. Any payments she made after being told about the error were made by her voluntarily rather than due to any “false, deceptive or misleading representation or means in connection with the collection of any debt.” The promptly-withdrawn offer also does not constitute “threatening to take any action that cannot be legally taken or that is not intended to be taken.” (15 U.S.C. §1692e(5).) Finally, these allegations also do not constitute “communicating or threatening to communicate to any person credit information which is known or which should be known to be false.” (15 U.S.C. §1692e(8).)

Accordingly, the Court sustains the demurrer to the RFDCPA claim.

Defendant argues that Plaintiff cannot state a RESPA claim because Defendant did not engage in dual tracking. The Court agrees.

RESPA prohibits so-called “dual tracking,” wherein a servicer initiates foreclosure proceedings while a completed loss mitigation application is pending. Here, Plaintiff claims Defendant indicated it was initiating foreclosure proceedings and recorded a notice of default as to Plaintiff’s mortgage while her July 11 loan modification application was still pending. But as shown in Ex. 2 to the RJN, Plaintiff did not have a complete loan modification application pending on July 20, 2022, when she claims the notice of default was recorded (FAC ¶26). Her application was not complete until July 25, 2022, five days after the recording of the notice of default. (Ex. 2 to RJN.)

Accordingly, the Court sustains the demurrer to the RESPA claim.

Breach of Contract Claim

Defendant argues that Plaintiff has not stated a claim for breach of contract because there is no contract as the offer was withdrawn on the same date Plaintiff purported to accept it; there was no consideration for the alleged agreement, and the offer letter expressly notes the modified terms will only take effect once both Plaintiff and Defendant have signed a permanent modification agreement which was never done. The Court agrees with the last point.

The offer, on page 4, expressly notes that “modified terms will take effect only after” both Plaintiff and Defendant have signed a permanent modification agreement following the completion of the trial period plan payments and the “[t]he terms of your existing note and mortgage remain in effect until the mortgage is permanently modified.” (Ex. 3 to RJN.) Here, no permanent modification is alleged to have been issued, let alone signed by either Plaintiff or Defendant.

Accordingly, there is no contract, and the Court sustains the demurrer to Plaintiff’s breach of contract claim.

Defendant argues that none of the requisite elements of fraud are pled here. The Court agrees.

The elements of fraud are (1) a misrepresentation (false representation, concealment or nondisclosure), (2) scienter or knowledge of its falsity, (3) intent to induce reliance, (4) justifiable reliance, and (5) resulting damage. (Hinesley v. Oakshade Town Ctr. (2005) 135 Cal.App.4th 289, 294.) The facts constituting the fraud must be alleged factually and specifically as to every element of fraud, as the policy of “liberal construction” of the pleadings will not be invoked. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.)

Here, there was no misrepresentation. Defendant sent a loan modification offer to Plaintiff by mistake, and told her the very day after the offer was sent that it was made in error. Plaintiff did not actually and justifiably rely on the alleged misrepresentation to make the modified loan payments because she already knew the offer was made in error prior to making any loan payments.

Further, to properly allege fraud against a corporation, the plaintiffs must plead the names of the persons allegedly making the false representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written. (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal. App.4th 153, 157.) The Complaint fails to identify any person who made the alleged misrepresentation and their authority to speak.

Accordingly, the Court sustains the demurrer to the fraud claim.

Defendant argues that Plaintiff’s UCL claim does not allege any conduct that is unlawful, unfair, or fraudulent. The Court agrees.

The “unlawful” prong of the UCL requires a plaintiff to demonstrate that the defendant’s conduct violated some other law. (Cel-Tech Comm., Inc. v. Los Angeles Cellular Tel. Co. (1999) 20 Cal.4th 163, 187.) Here, Plaintiff claims Defendant’s conduct violated CCCRAA, FCRA, RFDCPA and RESPA. As discussed above, however, Plaintiff has failed to allege facts that would support a violation of each of these acts.

The “unfair” prong of the UCL involves “conduct that threatens an incipient violation of an antitrust law, or violates the policy or spirit of one of those laws because its effects are comparable to or the same as a violation of the law, or otherwise significantly threatens or harms competition.” (Id. at 187.) Alternatively, an act is “unfair” under the UCL “if the consumer injury is substantive, is not outweighed by any countervailing benefits to consumers or to competition and is not an injury the consumers themselves could have reasonably avoided.” (Berryman v. Merit Prop. Mgmt, Inc. (2006) 152 Cal.App.4th 1544, 1555.) Here, the alleged misconduct by Defendant – its loan modification offer and prompt withdrawal – is not anti-competitive behavior, and it cannot be said that Plaintiff’s injury was substantive. The offer was withdrawn within a day, and any payments Plaintiff made in reliance on a withdrawn offer is an injury she could have reasonably avoided.

The “fraudulent” prong of the UCL requires a showing that members of the public are likely to be deceived. (Puentes v. Wells Fargo Home Mortg., Inc. (2008) 160 Cal.App.4th 638, 645.) There are no allegations here that any statements were disseminated to the public upon which reasonable consumers are likely to be deceived. Indeed, there were no misrepresentations made to Plaintiff as she admits Defendant informed her on the same day she sought to accept it that the offer was made in error. (FAC ¶¶ 33-37.)

Defendant moves to strike Plaintiff’s punitive damages claim because Plaintiff has not alleged malice, oppression or fraud. As the Court has sustained the demurrer as to the entire complaint including Plaintiff’s claim for fraud, the Court strikes Plaintiff’s prayer for punitive damages.