Judge: H. Jay Ford, III, Case: 22SMCV00595, Date: 2022-10-04 Tentative Ruling

Case Number: 22SMCV00595    Hearing Date: October 4, 2022    Dept: O

  Case Name:  Idham v. PS Funding, Inc., et al.

SUBJECT:                DEMURRER TO COMPLAINT

MOVING PARTY:   Defendant PS Funding, Inc.

RESP. PARTY:         Plaintiff Diana E. Idham

TENTATIVE RULING

            Defendant PS Funding, Inc.’s Demurrer to Complaint is SUSTAINED WITHOUT LEAVE TO AMEND.  Defendant’s RJN is GRANTED. Defendant is to prepare the order and judgment of dismissal.

I.  Demurrer to 1^st through 4^th causes of action for violations of Civil Code §§2923.5, 2923.6(c), 2923.7 and 2924.9 is SUSTAINED WITHOUT LEAVE TO AMEND   

            Plaintiff alleges violations of Civil Code §§2923.5, 2923.6(c), 2923.7 and 2924.9.  Pursuant to Civil Code §2924.15(a), each of these sections “shall only apply to a first lien mortgage or deed of trust that meets either of the following criteria:  (1)(A) The first lien mortgage or deed of trust is secured by owner-occupied residential real property containing no more than four dwelling units.  (B) For purposes of this paragraph, ‘owner-occupied’ means that the property is the principal residence of the borrower and is security for a loan made for personal, family, or household purposes.” 

            Plaintiff alleges that the property is “owner-occupied.”  See Complaint, ¶¶10 and 26.  However, Plaintiff does not allege that the property is “owner-occupied” as specifically defined under CC §2924.15(a)(1)(B).  Plaintiff alleges that a deed of trust was recorded against the property to secure a mortgage loan from Defendant in the amount of $442,000.  See Complaint, ¶9.  Plaintiff does not allege that the loan was for “personal, family or household purposes.” 

            In addition, Defendant submits a copy of the loan documents, including a Certificate of Business and Commercial Purpose of Loans executed by Plaintiff under penalty of perjury.  See Defendant’s RJN, Ex. 4.  Based on the Certificate of Business and Commercial Purpose of Loans, Plaintiff stated under penalty of perjury that the loan in question was not a loan for “personal, family or household purposes” but a commercial loan. 

            Plaintiff does not respond to Defendant’s contention that HBOR does not apply because the loan in question was a commercial loan.  Plaintiff fails to establish that the defect raised by Defendant is reasonably capable of cure with leave to amend.  Demurrer is therefore SUSTAINED WITHOUT LEAVE TO AMEND as to the 1^st through 4^th causes of action for violation of Civil Code §§2923.5, 2923.6(c), 2923.7 and 2924.9.

II.  5^th cause of action for violation of unfair competition law (B&PC 17200)—SUSTAIN WITHOUT LEAVE TO AMEND

            Plaintiff’s B&PC 17200 claim is based on the same violations of HBOR alleged in the 1^st through 4^th causes of action.  Plaintiff fails to identify any other alleged conduct in support of the 17200 claim.  Demurrer to the 5^th cause of action for violation of B&PC 17200 is SUSTAINED WITHOUT LEAVE TO AMEND.

III.  6^th cause of action for cancellation of instruments—SUSTAIN WITHOUT LEAVE TO AMEND

            “A written instrument, in respect to which there is a reasonable apprehension that if left outstanding it may cause serious injury to a person against whom it is void or voidable, may, upon his application, be so adjudged, and ordered to be delivered up or canceled.”  Civ. Code §3412.  Plaintiff alleges the Notice of Default  20210972577 and Notice of Trustee’s Sale 202110643 are void or voidable, because they violate Civil Code §§2923.5, 2923.6(c), 2923.7, 2924.9 and Title 15 U.S.C. §1641(g).  See Complaint, ¶76. 

            As stated above, Plaintiff cannot allege that HBOR applies to the subject commercial loan under CC §§2923.5, 2923.6(c), 2923.7, 2924.9.  For the same reason, Plaintiff cannot allege violation of 15 USC §1641(g), which is part of the Consumer Credit Cost Disclosure.  Like HBOR, 15 USC §1641(g) would only apply in the case of consumer credit transactions, defined as transactions that are “primarily for personal, family or household purposes.”  15 USC §1602(i).

            In addition, 15 USC §1641(g) applies to notices after sale or assignment of a mortgage loan.  Plaintiff does not allege that the subject loan was ever assigned or sold.  Plaintiff alleges that Defendant is the original lender and holder of the DOT.  See Complaint, ¶9, Ex. A. 

IV.  7^th cause of action for wrongful foreclosure—SUSTAIN WITHOUT LEAVE TO AMEND

            Plaintiff’s 7^th cause of action alleges a claim for the tort of wrongful foreclosure.  The basic elements of a tort cause of action for wrongful foreclosure track the elements of an equitable cause of action to set aside a foreclosure sale. They are: “(1) the trustee or mortgagee caused an illegal, fraudulent, or willfully oppressive sale of real property pursuant to a power of sale in a mortgage or deed of trust; (2) the party attacking the sale (usually but not always the trustor or mortgagor) was prejudiced or harmed; and (3) in cases where the trustor or mortgagor challenges the sale, the trustor or mortgagor tendered the amount of the secured indebtedness or was excused from tendering.”  Miles v. Deutsche Bank National Trust Co. (2015) 236 Cal.App.4th 394, 408. 

            Plaintiff’s wrongful foreclosure cause of action is based on Defendant’s alleged failure to comply with the HBOR provisions identified in the 1^st through 4^th causes of action.  More specifically, Plaintiff alleges the foreclosure was wrongful, because Defendant never provided reasons for denying a loan modification or providing alternatives to foreclosure.  See Complaint, ¶¶81, 84, 95.  HBOR imposes on lenders the obligation to provide reasons for loan modification denial and alternatives to foreclosure.  As discussed above, Plaintiff fails to allege that HBOR applies here. 

            In opposition, Plaintiff argues the foreclosure was wrongful, because it violated the Bankruptcy Stay.  However, Plaintiff alleges that her bankruptcy was dismissed on 3-30-22.  The sale allegedly occurred on 4-7-22, after the bankruptcy was dismissed. 

            In addition, based on Defendant’s RJN Exs. 2 and 4, Defendant and Plaintiff entered into a Stipulation, which was approved by the Bankruptcy Court.  Pursuant to that Stipulation and the subsequent Order, the bankruptcy stay was terminated as to the Subject Property on 2-24-22.  Pursuant to the Order, Defendant was allowed to pursue its “remedies in and to the Property in accordance with applicable nonbankruptcy law.”  See RJN, Ex. 4.  The sale occurred on 4-7-22, after the stay was terminated on 2-24-22 as to Defendant.    

            Plaintiff fails to identify any basis to find that the foreclosure sale was illegal, fraudulent, or willfully oppressive.  Demurrer is therefore SUSTAINED WITHOUT LEAVE TO AMEND to the 7^th cause of action for wrongful foreclosure.