Judge Jill Feeney, Case Number: 23STCV08549, Date: 2023-11-07 Tentative Ruling

This is an action for violations of Civil Code, sections 2923.6 and 2923.7. Plaintiff alleges that he owned the property located at 2240 Chelan Place, Los Angeles, CA 90068. (Compl., ¶1.) Plaintiff took out a mortgage loan against the property for $1,499,900 in August 2019. (Id., ¶15.) On March 4, 2020, Governor Gavin Newsome proclaimed a State of Emergency in California as a result of the COVID-19 pandemic. (Id., ¶16.) Executive Order N-28-20 provided California residents with relief from the threat of foreclosure. (Id., ¶17.) In February 2021, Plaintiff experienced a reduction of income after COVID-19 impacted his small business and he suffered an injury requiring surgery. (Id., ¶20.) On November 30, 2022, Defendant National Default Servicing Corporation (“NDSC”) recorded a Notice of Default. (Id., ¶21.) Plaintiff contacted Defendant Newrez LLC dba Shellpoint Mortgage Servicing (“Shellpoint”) about mitigation options. (Id., ¶22.) Shellpoint instructed Plaintiff to submit a mortgage assistance application. (Id.) In February 2023, Plaintiff submitted a complete loss mitigation application to Shellpoint. (Id., ¶24.) As of the date of the filing of Plaintiff’s Complaint, Shellpoint has not provided Plaintiff with a written determination of his application. (Id., ¶25.) In March 2023, NDSC issued a Notice of Trustee’s Sale and stated Defendants’ intent to conduct a trustee’s sale on April 21, 2023. (Id., ¶¶26-27.)

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context. 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 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. (Code Civ. Proc., section, section 430.30, 430.70.) At the pleading stage, a plaintiff need only allege ultimate facts sufficient to apprise the defendant of the factual basis for the claim against him. (Semole v. Sansoucie (1972) 28 Cal. App. 3d 714, 721.) A “demurrer does not, however, admit contentions, deductions or conclusions of fact or law alleged in the pleading, or the construction of instruments pleaded, or facts impossible in law.” (S. Shore Land Co. v. Petersen (1964) 226 Cal.App.2d 725, 732 (internal citations omitted).)

A party filing a demurrer “shall meet and confer in person or by telephone with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” (Code Civ. Proc., section 430.41(a).) “The parties shall meet and confer at least five days before the date the responsive pleading is due. If the parties are not able to meet and confer at least five days prior to the date the responsive pleading is due, the demurring party shall be granted an automatic 30-day extension of time within which to file a responsive pleading, by filing and serving, on or before the date on which a demurrer would be due, a declaration stating under penalty of perjury that a good faith attempt to meet and confer was made and explaining the reasons why the parties could not meet and confer.” (Code Civ. Proc., section 430.41(a)(2).) A failure to meet and confer does not constitute grounds to sustain or overrule a demurrer. (See Code Civ. Proc., sections 430.41 (a)(4).)

Here, Defendant’s counsel provides a declaration in support of an automatic extension under Code Civ. Proc., sections 430.41, 435.5, and 439 stating he was unable to meet and confer with Plaintiff before the deadline to file a responsive pleading. Defendant satisfies its meet and confer obligations because counsel attempted to meet and confer with Plaintiff prior to filing this demurrer.

Civ. Code, section 2923.6 provides that if “a borrower submits a complete application for a first lien loan modification offered by, or through, the borrower's mortgage servicer at least five business days before a scheduled foreclosure sale, a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of default or notice of sale, or conduct a trustee's sale, while the complete first lien loan modification application is pending. A mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of default or notice of sale or conduct a trustee's sale until any of the following occurs:

If a borrower’s application is denied, the mortgage servicer shall not record a notice of default or, if a notice of default has already been recorded, record a notice of sale or conduct a trustee’s sale until the later of (1) thirty-one days after the borrower is notified in writing of the denial or (2) if the borrower appeals the denial, after the later of 15 days after the denial of the appeal or 14 days after a first lien loan modification is offered after appeal but declined by the borrower, or, if a first lien loan modification is offered and accepted after appeal, the date on which the borrower fails to timely submit the first payment or otherwise breaches the terms of the offer. (Civ. Code, section 2923.6(e).)

Here, Defendant argues that the Complaint fails to allege facts establishing that Plaintiff submitted all the requested documents to Shellpoint within timeframes specified by Shellpoint and that Shellpoint deemed his application complete. Additionally, the alleged violation was not material because Plaintiff did not qualify for loan modification. Defendants cite an unpublished case, Hernandez v. Select Portfolio Servicing, Inc., 2015 WL 3914741, which states conclusory pleadings that a borrower submitted a complete modification application is insufficient to state a claim under section 2923.6. However, this case involved a motion to dismiss under the Federal Rules of Civil Procedure, rule 12b(6), which requires that a complaint state enough facts to state a claim to relief that is plausible on its face, which is a different standard than demurrers under California law. California operates under a lower standard requiring that a plaintiff need only allege ultimate facts sufficient to apprise the defendant of the factual basis for the claim against the defendant.

Plaintiff’s Complaint alleges that he submitted a complete loss mitigation application to Shellpoint for review in February 2023, after Defendants had issued a notice of default in November 2022 but before Defendants issued their notice of trustee’s sale in March 2023. (Compl., ¶¶22-26.) Because Plaintiff does allege that he submitted a complete application before Defendants issued the notice of trustee’s sale, the Complaint alleges sufficient facts to allege that Defendants violated Civ. Code, section 2923.6. Additionally, even if the modification application was denied, Defendants were still required to give written notice of the denial and were enjoined from issuing a notice of trustee’s sale until 31 days after Plaintiff was notified.

A material violation is one that affected the borrower's loan obligations, disrupted the borrower's loan-modification process, or otherwise harmed the borrower. (Billesbach v. Specialized Loan Servicing LLC (2021) 63 Cal.App.5th 830, 837.) The “otherwise harmed the borrower” means harm to the borrower in her efforts to be considered for a loss mitigation option (Morris v. JPMorgan Chase Bank, N.A. (2022) 78 Cal.App.5th 279, 304.)

It is reasonable to infer that because Plaintiff never received written notice of the denial of his loan modification application, Plaintiff did not have the opportunity to appeal the decision as permitted by Civ. Code, section 2923.6(d) and thus lost the opportunity to modify the loan depending on the outcome of the appeal. The Court finds that the facts are sufficient to allege a material violation of section 2923.6.

Defendant argues that the violation was not material because Plaintiff did not qualify for modification. Although Defendant cites ¶45 of the Complaint, this paragraph does not state Plaintiff did not qualify for modification. The Complaint does not touch on whether Plaintiff qualified for a modification. Therefore, Defendants’ allegation that Plaintiff did not qualify for a modification is a fact that does not appear on the face of the pleading and may not be considered on demurrer.

Defendant’s demur to the second cause of action for violation of Civ. Code, section 2923.7 on the grounds that the Complaint fails to allege facts showing he spoke to anyone purporting to be his single point of contact (“SPOC”), what was discussed, and what information was or was not provided. Additionally, Defendants argue that the alleged violation was not material because Plaintiff was reviewed for loan modification and was denied.

Civ. Code, section 2923.7 provides that “when a borrower requests a foreclosure prevention alternative, the mortgage servicer shall promptly establish a single point of contact and provide to the borrower one or more direct means of communication with the single point of contact.” (Civ. Code, section 2923.7, subd. (a).) “For purposes of this section, ‘single point of contact’ means an individual or team of personnel each of whom has the ability and authority to perform the responsibilities described” below. (Id., subd. (e).)

“The single point of contact shall be responsible for doing all of the following: (1) Communicating the process by which a borrower may apply for an available foreclosure prevention alternative and the deadline for any required submissions to be considered for these options; (2) Coordinating receipt of all documents associated with available foreclosure prevention alternatives and notifying the borrower of any missing documents necessary to complete the application; (3) Having access to current information and personnel sufficient to timely, accurately, and adequately inform the borrower of the current status of the foreclosure prevention alternative; (4) Ensuring that a borrower is considered for all foreclosure prevention alternatives offered by, or through, the mortgage servicer, if any; and (5) Having access to individuals with the ability and authority to stop foreclosure proceedings when necessary.” (Id., subd. (b).)

Here, Plaintiff’s Complaint alleges that Defendant failed to provide Plaintiff with a SPOC who was consistent, knowledgeable, and authoritative to assist him through the modification process. (Compl., ¶52.) Instead, Plaintiff was forced to speak with multiple of Defendant’s personnel who were unfamiliar with his file and financial circumstances. (Id.) No agent reviewed Plaintiff’s eligibility for a home retention option in good faith, coordinated the receipt of documentation, informed Plaintiff of the status of Plaintiff’s application status, or had the authority to stop the foreclosure process. (Id., ¶54.) As a result of the violation, Plaintiff was deprived of the meaningful opportunity to prevent foreclosure and become current on his loan. (Id., ¶56.)

Plaintiff’s Complaint sufficiently alleges violations of Civ Code, section 2923.7 because the Complaint alleges that Plaintiff was never assigned a SPOC, that Defendants’ personnel did not inform Plaintiff of a foreclosure prevention alternative, and that Defendants’ personnel were not familiar with his file. There is no requirement that the SPOC personnel have authority to stop foreclosure proceedings, only that they must have access to individuals with that ability. However, the other allegations in the Complaint are sufficient to allege violations of section 2923.7.

“Promissory estoppel applies whenever a ‘promise which the promissor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance’ would result in an ‘injustice’ if the promise were not enforced.” (Advanced Choices, Inc. v. State Dept. of Health Servs. (2010) 182 Cal.App.4th 1661, 1671-1672.) “The elements of a promissory estoppel claim are ‘(1) a promise clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3) [the] reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by his reliance.’” (Ibid.) The party claiming estoppel must specifically plead all facts relied on to establish its elements. (Smith v. City and County of San Francisco (1990) 225 Cal.App.3d 38, 48 (Smith).) “Under this doctrine a promisor is bound when he should reasonably expect a substantial change of position, either by act or forbearance, in reliance on his promise, if injustice can be avoided only by its enforcement.” (Ibid.)

Here, the Complaint states that Plaintiff’s application for loan modification was improperly denied. (Compl., ¶65.) Plaintiff alleges that the application process was a promise upon which he relied and that he did nothing further to modify the loan or avoid foreclosure. (Id., ¶66.) Plaintiff’s reliance on the application process was reasonable and foreseeable because he wasn’t given a reason for the denial. (Id., ¶67.)

The Complaint fails to state that Defendants made a promise. The Complaint merely states that Plaintiff was instructed to submit and proceeded to submit a completed loss mitigation application. The fact that Defendants had a modification application alone does not show that Defendants made any promise regarding Plaintiff’s loan. The Complaint does not contain any facts that Defendant represented to Plaintiff that he was not required to take any other steps to prevent foreclosure after submitting the application. Plaintiff argues that the application process implied that foreclosure would not take place while it was still pending. However, the Complaint does not state that Defendants made any promise that foreclosure would be stayed while the application was still pending. Additionally, even if there had been a promise, the Complaint fails to allege how Plaintiff’s failure to do anything else to modify his loan or avoid foreclosure injured him.

The necessary elements for an injunction are: (1) a cause of action arising from a wrongful act; and (2) a basis for equitable relief, ordinarily because of a threat of irreparable or because there is no adequate remedy at law available. Brownfield v. Daniel Freeman Marina Hospital (1989) 208 Cal.App.3d 405, 410.