Judge: Gregory Keosian, Case: 212STCV14230, Date: 2022-09-29 Tentative Ruling
Case Number: 212STCV14230 Hearing Date: September 29, 2022 Dept: 61
Defendant PHH Corporation’s
Demurrer to the First Amended Complaint is SUSTAINED with 30 days leave to
amend as to the fourth cause of action for violation of Business &
Professions Code § 17200, fifth cause of action for fraud, and the ninth cause
of action for fraudulent transfer, and is otherwise OVERRULED.
I.
DEMURRER
A demurrer should be sustained only where the defects appear
on the face of the pleading or are judicially noticed. (Code Civ. Pro., §§
430.30, et seq.) In particular, as is
relevant here, a court should sustain a demurrer if a complaint does not allege
facts that are legally sufficient to constitute a cause of action. (See
id. § 430.10, subd. (e).) As the Supreme Court held in Blank v. Kirwan (1985) Cal.3d 311: “We
treat the demurrer as admitting all material facts properly pleaded, but not
contentions, deductions or conclusions of fact or law. . . . Further, we give
the complaint a reasonable interpretation, reading it as a whole and its parts
in their context.” (Id. at p.
318; see also Hahn. v. Mirda (2007)
147 Cal.App.4th 740, 747 [“A demurrer tests the pleadings alone and not the
evidence or other extrinsic matters. Therefore, it lies only where the defects
appear on the face of the pleading or are judicially noticed. [Citation.]”)
“In determining whether the complaint is sufficient as
against the demurrer … if on consideration of all the facts stated it appears
the plaintiff is entitled to any relief at the hands of the court against the
defendants the complaint will be held good although the facts may not be
clearly stated.” (Gressley v. Williams (1961) 193 Cal.App.2d 636, 639.)
“A demurrer
for uncertainty is strictly construed, even where a complaint is in some
respects uncertain, because ambiguities can be clarified under modern discovery
procedures.” (Khoury v. Maly’s of Cal., Inc. (1993) 14 Cal.App.4th 612,
616.) Such demurrers “are disfavored,
and are granted only if the pleading is so incomprehensible that a defendant
cannot reasonably respond.” (Mahan v.
Charles W. Chan Insurance Agency, Inc. (2017) 14 Cal.App.5th 841, 848.)
Defendant PHH
Mortgage Corporation (Defendant) demurrers to the FAC on multiple grounds. It
argues that this suit is barred entirely by the doctrine of res judicata, as an
identical suit was dismissed with prejudice in July 2017. (Demurrer at p. 11;
RJN Exh. K.) Defendant further argues that each of the alleged causes of action
— for fraud, breach of contract, and for breach of statutory foreclosure
requirements — fail on the merits for lack of specific factual allegations.
(Demurrer at pp. 15–20.)
Defendant’s
arguments concerning res judicata are not persuasive. “Claim preclusion, often
referred to as res judicata, provides that “a valid, final judgment on the
merits precludes parties or their privies from relitigating the same ‘cause of
action’ in a subsequent suit.” (City of Oakland v. Oakland Police & Fire
Retirement System (2014) 224 Cal.App.4th 210, 227.) The doctrine of issue
preclusion “precludes relitigation of issues argued and decided in prior
proceedings.” (Id. at p. 227.) Issue preclusion “applies: (1) after
final adjudication (2) of an identical issue (3) actually litigated and
necessarily decided in the first suit and (4) asserted against one who was a
party in the first suit or one in privity with that party.” (DKN Holdings v.
Faerber (2015) 61 Cal.4th 813, 825.)
Here, res judicata
furnishes no basis to sustain the demurrer, as the claims in the FAC are
supported by facts not at issue in the prior litigation. The prior complaint —
filed on December 13, 2016, in LASC Case No. BC643705 — concerned allegations
of secret plans by defendant trustees and loan servicers to sell the property
by foreclosure in 2016 without adequate notice. (RJN Exh. J.) None of those
allegations remain at issue in the present pleadings, which concern an alleged
short-sale contract made in early 2022, and failures of notice that post-date
the prior litigation entirely. The demurrer therefore cannot be sustained on
this ground.
Defendant next
argues that any claim based on an alleged breach of contract cannot proceed
because Plaintiffs do not attach the relevant contract. (Demurrer at p. 15.)
This argument misreads the applicable standard, as a contract may be pleaded
verbatim or by its attachment to the complaint, or one may “plead its legal
effect.” (Miles v. Deutsche Bank National Trust Co. (2015) 236
Cal.App.4th 394, 401–02.) Here, the alleged contract was for Defendant to allow
Plaintiff to engage in a short-sale of the property for $1.4 million in payment
of the remaining debt on the property. (FAC at p. 4.) The legal effect is thus
alleged.
Defendant next argues
that any such contract would violate the statute of frauds without a writing
memorializing the agreement. (Demurrer at p. 16.) But the FAC in fact alleges
that such a writing does exist, and pleads the claim as one for breach of
written contract. (FAC at pp. 42–43.) Accordingly, the demurrer to the first,
second, third, sixth, seventh, and eighth causes of action, which are founded
upon the alleged contract, are OVERRULED.
Defendant argues
that the fifth cause of action for fraud fails because it is not pleaded with
the requisite specificity. (Demurrer at p. 16.) The elements of fraud are: (1)
misrepresentation (false representation, concealment, or nondisclosure); (2)
knowledge of falsity (scienter); (3) intent to defraud or induce reliance; (4)
justifiable reliance; and (5) damages. (See
Lazar v. Superior Court (1996) 12
Cal.4th 631, 638.) It is well-established that “[t]o withstand a demurrer, the
facts constituting every element of fraud must be alleged with particularity,
and the claim cannot be salvaged by references to the general policy favoring
the liberal construction of pleadings.” (Goldrich
v. Natural Y Surgical Specialties, Inc. (1994) 25 Cal.App.4th 772, 782.) “This
particularity requirement necessitates pleading facts which show how,
when, where, to whom, and by what means the representations were tendered.” (Lazar, supra, 12 Cal.4th at p.
645 (internal quotation marks omitted).)
Defendant is
correct that the fraud claim is not adequately pleaded. The only fraud alleged
in the FAC is the failure to provide notice of the April 2022 foreclosure. (FAC
at pp. 37–38.) The demurrer is therefore SUSTAINED as to the fifth cause of
action with leave to amend.
Defendant further
argues that the fourth cause of action for statutory violations fails because
the FAC either fails to allege sufficient violations or else discloses facts
foreclosing the existence of a violation. (Demurrer at p. 17.) Defendant notes
that the requirement that trustees touch base with mortgagors prior to filing
notices of default to discuss foreclosure alternatives “must be narrowly
construed in order to avoid crossing the line from state foreclosure law into
federally preempted loan servicing.” (Mabry v. Superior Court (2010) 185
Cal.App.4th 208, 232.) As such, the FAC discloses that Defendant, by entering a
contract for short-sale, necessarily discussed foreclosure alternatives
required by the statute. (See ibid. [holding that exploration of
foreclosure alternatives is necessarily limited to informing borrower of
“tradional ways that foreclosure can be avoided (e.g. deeds ‘in lieu’,
workouts, or short sales)”].) Likewise, although Plaintiff alleges a failure to
serve a notice of default or notice of trustee’s sale, the FAC does not include
such failures in the fourth cause of action, and does not allege any prejudice
resulting from this violation. (See Orcilla v. Big Sur, Inc. (2016) 244
Cal.App.4th 982, 1002 [“To successfully challenge a foreclosure sale based on a
procedural irregularity, such as the incorrect date of sale in the notice of
sale at issue here, the plaintiff must show that the irregularity caused him or
her prejudice.”].) As such, Plaintiff fails to state a claim for statutory
violations, or to allege a predicate violation sufficient to allege an unlawful
business practice under Business & Professions Code § 17200. The demurrer
is therefore SUSTAINED with leave to amend as to the fourth cause of action.
Additionally,
Defendant is correct that the FAC alleges no facts to support the ninth cause
of action for fraudulent transfer. (Demurrer at pp. 20–21.) Plaintiff pleads in
conclusory fashion that the foreclosure was conducted by private sale rather
than public auction, but alleges no supporting facts such as are necessary to
sustain such a claim. (FAC at pp. 46–47; see
Citrus El
Dorado, LLC v. Chicago Title Co. (2019) 32 Cal.App.5th 943, 951[holding on demurrer that the plaintiff
“has pleaded no facts showing that the sale was not conducted as a public
auction”].)
Accordingly, the
demurrer is SUSTAINED as to the fourth, fifth, and ninth causes of action, with
leave to amend.