Judge John J. Kralik, Case Number: 22BBCV00388, Date: 2023-12-01 Tentative Ruling

Plaintiff Jim Cohan (“Plaintiff,” a self-represented litigant) alleges that he is the owner of the residential property located at 9823 Edmore Place, Sun Valley, CA 91352. He alleges that Defendant Nationstar Mortgage, LLC (“Nationstar”) is the mortgage servicing company and is an agent for Defendant Bank of New York Mellon (“BONY”) concerning the mortgage on the property.

Plaintiff alleges that on January 9, 2022, he received a Notice of Trustee Sale from Clear Recon Corp. He alleges that he was being helped by a real estate broker who should have informed Clear Recon Corp, Nationstar, and BONY that he requested all ADA assistance.

Plaintiff alleges that he filed his first loan modification after January 2020 and Nationstar promised him and fair and thorough review of his filings, btu the request was denied on August 28, 2020 without any specific information on how to cure defects. Plaintiff alleges he had a special relationship with Nationstar such that it had a legal duty to accurately review his application and not mishandle his documents or cause untimely delays. Plaintiff alleges Nationstar falsely represented it would review Plaintiff for foreclosure alternatives.

The first amended complaint (“FAC”), filed August 16, 2023, states in the caption that the alleged causes of action are for: (1) constructive fraud; (2) statutory violations; (3) promissory estoppel; (4) intentional misrepresentation; and (5) violation of Business & Professions Code, § 17200 et seq. However, the body of the FAC alleges 10 causes of action: (1) violation of Civil Code, § 2924.17; (2) violation of Civil Code, § 2923.5; (3) violation of Civil Code, § 2923.6; (4) negligence; (5) intentional misrepresentation (Civ. Code, §§ 1709 et seq.); (6) promissory estoppel; (7) breach of the implied warranty of good faith and fair dealing; (8) unfair competition – unlawful prong; (9) unfair prong; and (10) fraudulent prong.

On October 16, 2023, Defendants Nationstar LLC d/b/a Mr. Cooper (“Nationstar”) and Bank of New York Mellon FKA The Bank of New York as Trustee for the Structured Asset Mortgage Investments II Trust, Mortgage Pass-Through Certificates, Series 2006-AR8 (“BONY”) filed a demurrer to each cause of action in the FAC.

Nationstar and BONY request judicial notice of Exhibits: (1) the deed of trust dated September 7, 2006 recorded on September 14, 2006 relating to the subject property; (2) the grant deed recorded on June 18, 2007; (3) the corporate assignment of deed of trust recorded on January 5, 2011; (4) the corporate assignment of deed of trust on April 2, 2014; (5) the substitution of trustee recorded on April 28, 2014; (6) the notice of default recorded on June 18, 2014; (7) a copy of the docket in the U.S. Bankruptcy Court, California Central, case number 1:21bk11525, retrieved on October 12, 2023; (8) a copy of the docket in the U.S. Bankruptcy Court, California Central, case number 1:21bk11884, retrieved on October 12, 2023; (9) a copy of the docket in the U.S. Bankruptcy Court, California Central, case number 1:22bk10603, retrieved on October 12, 2023; (10) the orders granting a motion for relief from automatic stay recorded on August 29, 2022 against the property; (11) the notice of trustee’s sale recorded on October 26, 2012; and (12) the August 28, 2020 correspondence from Nationstar to Plaintiff referenced in the complaint as Appendix A.

The request is granted as to Exhibits 1-12. Exhibits 1-6 and 11 consist of documents pertaining to the subject property that have been recorded in the Official Records of the Los Angeles Recorder’s Office. (Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 264-267.) Exhibits 7-10 include copies of court dockets with the U.S. Bankruptcy Court. (Evid. Code, § 452(d).) Finally, Exhibit 12 includes the August 28, 2020 denial document referenced by Plaintiff in his complaint as “Appendix A” (Compl., ¶11), but the document was not attached to the complaint. (Id.)

A. 1^st and 2^nd causes of action for Violation of Civil Code, §§ 2924.17 and 2923.5

Civil Code, § 2924.17 provides the requirements for declarations recorded by a mortgage servicer in connection with a foreclosure. Section 2923.5 states the timing and requirements for a mortgage servicer to record a notice of default.

In the 1^st cause of action, Plaintiff alleges that Nationstar filed a Notice of Default (“NOD”) on several occasions with declarations, but that the declarations were not based on facts, which constitutes a material violation of section 2924.17 by depriving Plaintiff a meaningful opportunity to pursue loss prevention options to rent foreclosure. (FAC, ¶¶31-32.) He seeks treble or statutory damages of $50,000. (Id., ¶33.)

In the 2^nd cause of action, Plaintiff alleges that Nationstar willfully failed to satisfy the notice requirements and willfully/recklessly proceeded with the recording of the NOD despite failing to satisfy requirements, which deprived Plaintiff of a meaningful opportunity to pursue loss prevention. (Id., ¶¶34-35.) Plaintiff alleges this is a material breach. (Id., ¶36.) He seeks treble or statutory damages of $50,000. (Id., ¶37.)

Plaintiff’s 1^st cause of action fails to allege any facts in support of this statutory cause of action showing how Nationstar violated section 2924.17. While Plaintiff argues in a general conclusory fashion that Nationstar’s declaration was insufficient, Plaintiff has not alleged facts supporting how the declaration was not based on fact or was insufficient.

Similarly, the 2^nd cause of action is not supported by facts showing how Nationstar failed to satisfy the requirements to record an NOD. Again, the allegations are conclusory and are not supported by any factual allegations.

As such, there is substantive merit to sustaining the demurrer as to the 1^st and 2^nd causes of action.

The Court has reviewed Plaintiff’s opposition brief. He argues that the complaint alleges valid causes of action when the allegations are taken as true and that there is a special relationship between the parties. Plaintiff’s opposition does not address the substantive arguments made by Defendants in their moving papers, nor does Plaintiff show how, upon amendment, he can cure the defects.

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:

(1) The mortgage servicer makes a written determination that the borrower is not eligible for a first lien loan modification, and any appeal period pursuant to subdivision (d) has expired.

(2) The borrower does not accept an offered first lien loan modification within 14 days of the offer.

(3) The borrower accepts a written first lien loan modification, but defaults on, or otherwise breaches the borrower's obligations under, the first lien loan modification

In the 3^rd cause of action, Plaintiff alleges that he submitted a complete application more than 5 days prior to the scheduled foreclosure sale on several occasions. (FAC, ¶38.) He alleges that Nationstar never made a written determination that Plaintiff was not eligible and did not offer a first lien modification. (Id., ¶¶39-40.) Thus, Plaintiff alleges that any attempt to conduct a trustee’s sale was in violation of section 2923.6. (Id., ¶41.) Plaintiff seeks damages. (Id., ¶42.)

Nationstar argues that Plaintiff has not alleged facts showing that he submitted a “complete” application as required under section 2923.6(c). Nationstar argues that the only allegation in the FAC that support this cause of action are that he submitted an application in January 2020 and the application was denied on August 28, 2020. (FAC, ¶19; Def.’s RJN Ex. 12.) The August 28, 2020 letter states that Plaintiff’s request was denied for proprietary modification, short sale, and deed in lieu. (Def.’s RJN, Ex. 12.) The letter provides different options for Plaintiff and states the reasons he was not approved for the three requests – namely because the requests were incomplete, and Plaintiff had not provided all the documents in the required timeframe. (See id. at p.2.) Further, a subsequent application may be reviewed by Nationstar where “there has been a material change in the borrower's financial circumstances since the date of the borrower’s previous application and that change is documented by the borrower and submitted to the mortgage servicer.” (Civ. Code, § 2923.6(g).) Although Plaintiff alleges he submitted additional requests, he has not alleged facts alleging when such documents were submitted and he has not alleged facts showing that there was a material change in his circumstances that would obligate Nationstar to evaluate his subsequent applications.

The demurrer to the 3^rd cause of action is sustained. Again, the same defects that existed in the initial complaint persist in the FAC. As such, the Court is inclined to sustain the demurrer to the 3^rd cause of action without leave to amend.

The elements of a negligence cause of action are “duty, breach of duty, proximate cause, and damages.” (Carlsen v. Koivumaki (2014) 227 Cal.App.4th 879, 892.) Under California law, a lender owes no general duty of care to the borrower. (Nymark v. Heart Federal Savings & Loan Ass’n (1991) 231 Cal.App.3d 1089, 1096 [“[A]s a general rule, a financial institution owes no legal duty of care to a borrower when the institution’s involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money.”].)

As stated by the California Supreme Court in Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905 stated:

A lender's handling of a modification application is part of a process by which the lender decides whether it should adhere to the existing contract or offer a new agreement (and if so, under what terms). It is a step in the lender's determination concerning how best to collect the money it had dispersed under the loan, whether that be by foreclosing (seizing and selling the collateral to pay back the loan) or offering new terms that are less favorable to the lender than the original contract but that potentially improve the odds of the borrower paying. In short, a lender's involvement in the loan modification process — specifically whether it “process[es], review[s] and respond[s] carefully and completely to the loan modification applications [a borrower] submitted” — is part and parcel of its assessment regarding how best to recoup the money it is owed.

(Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 928.) “[W]hen a borrower requests a loan modification, a lender owes no tort duty sounding in general negligence principles to ‘process, review and respond carefully and completely to’ the borrower's application.” (Id. at 948.)

In the 4^th cause of action, Plaintiff alleges that Nationstar owed a duty to Plaintiff to exercise reasonable care in handling his loan modification. (FAC at p.8, lines 15-16.)[1] Plaintiff alleges that Nationstar breached its duty when it failed to adhere to foreclosure procedures pursuant to California law, such that he lacked ta meaningful opportunity to pursue realistic loss prevention options to prevent foreclosure of his home. (Id. at p.8, lines 17-19.) He alleges that Nationstar negligently, willfully, and falsely misrepresented that they would review his completed loan modification application within the correct time frame and would fairly evaluate loss mitigation options and inform him of his options, but that Nationstar failed to do so, which amounted to a breach. (Id. at p.8, lines 20-24.)

Plaintiff’s negligence cause of action is based on duty that Nationstar purportedly owed Plaintiff to review his application. However, such a duty is not generally imposed on mortgage servicers like Nationstar. (See Nymark, supra, 231 Cal.App.3d at 1096; Sheen, supra, 12 Cal.5th at 928.) Without this element of duty, the negligence cause of action fails.

As such, the demurrer to the 4^th cause of action is sustained without leave to amend.

D. 5^th cause of action for Intentional Misrepresentation (Civ. Code, §§ 1709 et seq.)

In the 5^th cause of action, Plaintiff alleges that Nationstar’s promise was clear and unambiguous. (FAC at p.9.) He alleges that based on Nationstar’s promise, it was reasonable and foreseeable that borrowers apply for a loan modification and not seek out other loss prevention options for foreclosure. (Id.) He alleges he relied on Nationstar’s promise and did not seek other loss prevention options. (Id., ¶46.)

Plaintiff’s allegations for the fraud cause of action lack the specificity required to allege such a claim. He has not alleged facts showing how, when, where, to whom, and by what means the misrepresentations were made. It is also unclear what the nature of the representation was in the first place, such that Defendants and the Court cannot ascertain whether the other elements for fraud. At most, Plaintiff alleges that the promise was clear and unambiguous, but it is unclear what the promise was. A claim for fraud must be plead with requisite particularity. As such, this cause of action has not been adequately pled.

The demurrer as to the 5^th cause of action is sustained. As Plaintiff has not shown an ability to amend, leave to amend is not granted.

In the 6^th cause of action, Plaintiff alleges that Nationstar willfully, falsely, and knowingly misrepresented that Plaintiff’s application would be reviewed fully and fairly. (FAC, ¶47.) He alleges that Nationstar’s misrepresentations were communicated to Plaintiff with its loan modification application. (Id., ¶48.) He alleges that after the initial application, Nationstar knew that it had misrepresented that it would evaluate loss mitigation options upon receiving a complete application because Nationstar was also seeking foreclosure. (Id., ¶49.) He alleges that Nationstar misrepresented that Plaintiff’s application would be fairly and fully reviewed and that such misrepresentation was made with intent for Plaintiff to rely upon it. (Id., ¶¶50-51.) Plaintiff alleges that Nationstar’s misrepresentations were made with knowledge of falsity or in reckless disregard of the truths thereof. (Id., ¶52.) He alleges that in actual and reasonable reliance, he did not seek out other loss prevention options to prevent foreclosure. (Id., ¶53.)

While Plaintiff alleges that Nationstar misrepresented regarding the evaluation of loss mitigation options, Defendants argue that Plaintiff has not alleged facts showing that their promise was false. Plaintiff alleges in the FAC that Nationstar did in fact review his application and denied the application by letter dated August 28, 2020. (FAC, ¶19.) Further, Defendants argue that Plaintiff has not alleged facts showing that he had other loss mitigation options other than filing the application with Nationstar, such that Plaintiff has not alleged facts supporting the element of reliance. Defendants argue that they are not obligated to provide a loan modification to Plaintiff, who has been in default since 2009. (See Def.’s RJN, Ex. 6 [6/18/14 Notice of Default showing that Plaintiff has been in default since 7/1/2009].)

The demurrer to the 6^th cause of action is sustained. The Court is not inclined to grant leave to amend.

F. 7^th cause of action for Breach of the implied warranty of good faith and fair dealing

“There is an implied covenant of good faith and fair dealing in every contract that neither party will do anything which will injure the right of the other to receive the benefits of the agreement.” (Comunale v. Traders & General Ins. Co. (1958) 50 Cal.2d 654, 658.) “Without a contractual underpinning, there is no independent claim for breach of the implied covenant.” (Fireman's Fund Ins. Co. v. Maryland Casualty Co. (1994) 21 Cal.App.4th 1586, 1599.) “The prerequisite for any action for breach of the implied covenant of good faith and fair dealing is the existence of a contractual relationship between the parties, since the covenant is an implied term in the contract.” (Smith v. City & Cnty. of San Francisco (1990) 225 Cal.App.3d 38, 49.)

In the 7^th cause of action, Plaintiff alleges that in every loan agreement, there is an implied covenant of good faith and fair dealing. (FAC, ¶55.) He alleges that Nationstar unfairly interfered with his right to receive the benefits of the loan agreement because Nationstar failed to comply with the HBOR’s foreclosure procedures. (Id.) Plaintiff alleges he was harmed by Nationstar’s conduct and lost the opportunity to seek foreclosure alternatives. (Id., ¶56.)

There are several issues with this cause of action as currently alleged by Plaintiff. Plaintiff has not alleged the terms of the contract that Nationstar allegedly interfered with to prevent Plaintiff from obtaining the benefits of the agreement. Defendants argue that the underlying loan contract did not have any modification terms, such that Defendants could not have interfered with such an obligation. (Def.’s RJN, Ex. 1.) Defendants also argue that Plaintiff cannot allege that he performed on the underlying contract (i.e., the loan agreement), which required him to pay back his loan since July 2009. (Def.’s RJN, Ex. 6.)

Accordingly, the demurer to the 7^th cause of action is sustained without leave to amend.

The Unfair Competition Law (“UCL”) prohibits any unlawful, unfair, or fraudulent business practice. (Bus. & Profs. Code, § 17200.) A plaintiff alleging unfair business practices under these statutes must state with reasonable particularity the facts supporting the statutory elements of the violation. (Khoury v. Maly's of Cal., Inc. (1993) 14 Cal.App.4th 612, 619.) The person suing for a UCL claim must allege that he suffered injury in fact and has lost money or property as a result of the unfair competition. (Bus. & Profs. Code, § 17204.)

Plaintiff’s causes of action for unfair competition under the unlawful, unfair, and fraudulent prongs fail to allege facts with reasonable particularly required for a statutory claim.

A violation of the unfair prong of section 17200 involves an examination of the impact of the business practice on its alleged victim balanced against the reasons, justifications and motives of the alleged wrongdoer. (Searle v. Wyndham Int'l (2002) 102 Cal.App.4th 1327, 1334.) An unfair business practice occurs when it offends an established public policy or when the practice is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers. (Id.) In general, the unfairness prong has been used to enjoin deceptive or sharp practices. (Id.) However, the unfairness prong does not give the Courts a general license to review the fairness of contracts. (Id.) In the 9^th cause of action for violation of the unfair prong, Plaintiff alleges that Nationstar’s conduct is unfair because it violated Plaintiff’s rights under HBOR and it failed to abide by the foreclosure procedures set forth in the HBOR, such that Nationstar robbed Plaintiff of the opportunity to pursue alternatives to prevent foreclosure of the residence. (FAC, ¶¶64-65.) A review of the pleadings reveals no allegations that identify a particular business practice that offends established public policy or that is immoral, unethical, oppressive, unscrupulous, or substantially injurious to consumers. The allegations are highly generalized and fail to allege facts to support a claim for unfair competition under the unfair prong with reasonable particularity.

A violation of the unlawful prong includes anything that can properly be called a business practice and that at the same time is forbidden by law. (Paulus v. Bob Lynch Ford, Inc. (2006) 139 Cal. App. 4th 659, 676-677.) In the 8^th cause of action, Plaintiff alleges that Nationstar’s business practices were unlawful because its acts violated Civil Code, §§ 2935.5, 2923.6, 2924.10, and 2924.17. (FAC, ¶61.) A review of the pleadings reveals no allegations that identify a law, regulation, or statute and the particular business practices directed at Plaintiff that violated the identified law, regulation, or statute. As discussed above, Plaintiff has not alleged sufficient facts to support his claims based on violation of the Civil Code.

A violation of the fraudulent prong of section 17200 can be shown with allegations that the fraudulent practice was likely to deceive members of the public. (Schnall v. Hertz Corp. (2000) 78 Cal.App.4th 1144, 1167.) The “fraud” prong “is unlike common law fraud or deception. A violation can be shown even if no one was actually deceived, relied upon the fraudulent practice, or sustained any damage. Instead, it is only necessary to show that members of the public are likely to be deceived.” (Buller v. Sutter Health (2008) 160 Cal.App.4th 981, 986.) In the 10^th cause of action, Plaintiff alleges that Nationstar failed to abide by the foreclosure procedures set forth in the HBOR, thereby preventing Plaintiff from pursuing foreclosure alternatives. (FAC at p.12.) Plaintiff alleges that despite substantially or fully complying with Nationstar’s documents request and deadline, he was unable to pursue foreclosure alternatives and that Nationstar was able to attempt to sell his residence at a foreclosure sale. (Id.) A review of the pleading reveals no allegations that identify a particular business practice that was a fraudulent practice likely to deceive the public. Further, as discussed above, Plaintiff’s claims for fraud and promissory estoppel lacked sufficient facts to constitute claims against Defendants.

For these reasons, the demurrer to the 8^th to 10^th causes of action is sustained without leave to amend.

Defendants Nationstar LLC d/b/a Mr. Cooper and Bank of New York Mellon FKA The Bank of New York as Trustee for the Structured Asset Mortgage Investments II Trust, Mortgage Pass-Through Certificates, Series 2006-AR8’s demurrer to the First Amended Complaint is sustained. The Court is inclined to sustain the demurrer without leave to amend. Plaintiff has the burden of showing the manner in which Plaintiff can amend the pleadings to correct this defect and how that amendment will change the legal effect of the pleading. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.) Plaintiff appears unable to make this showing.

Defendants shall provide notice of this order.

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[1] Plaintiff’s FAC is inconsistent with its paragraph numbers. For example, on page 5, he alleges a paragraph 19 (with subparagraphs on page 6 from (1) to (5), but on page 7, he jumps to paragraph 30. Further, some of his allegations lack paragraph numbers, such as the 4^th cause of action on page 8 at lines 14 to 25.

Superior Court of California

County of Los Angeles

Department B