Judge: Mark A. Young, Case: 23SMCV02395, Date: 2024-02-28 Tentative Ruling
Case Number: 23SMCV02395 Hearing Date: February 28, 2024 Dept: M
CASE NAME: Moreno, et
al., v. Navient Solutions LLC, et al.
CASE NO.: 23SMCV02395
MOTION: Demurrer
to the Complaint
HEARING DATE: 2/28/2024
Legal
Standard
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. (CCP §§
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
special demurrer for uncertainty is disfavored and will only be sustained where
the pleading is so bad that defendant cannot reasonably respond—i.e., cannot
reasonably determine what issues must be admitted or denied, or what counts or
claims are directed against him/her. (CCP § 430.10(f); Khoury v. Maly’s
of Calif., Inc. (1993) 14 Cal.App.4th 612, 616.) Moreover, even if
the pleading is somewhat vague, “ambiguities can be clarified under modern
discovery procedures.” (Ibid.)
“Liberality in permitting amendment
is the rule, if a fair opportunity to correct any defect has not been given.” (Angie
M. v. Superior Court (1995) 37 Cal.App.4th 1217, 1227.) It is an abuse of
discretion for the court to deny leave to amend where there is any reasonable
possibility that plaintiff can state a good cause of action. (Goodman v.
Kennedy (1976) 18 Cal.3d 335, 349.) The burden is on plaintiff to
show in what manner plaintiff can amend the complaint,
and how that amendment will change the legal effect of the
pleading. (Id.)
Analysis
Defendant Navient Solutions LLC demurs to the first, third and fourth
causes of action of Plaintiff Monica Morena’s complaint. The complaint alleges
four causes of action for (1) Private Student Loan Collections Reform Act (“PSLCRA”)
(Civil Code § 1788.200 et seq.); (2) Student Borrower Bill of Rights (Civil
Code § 1788.100, et seq.); (3) Rosenthal Fair Debt Collection Practices Act
(Civil Code § 1788 et seq.); and (4) Declaratory Relief.
Judicial Notice
Defendant’s request for judicial notice is GRANTED. (RJN Ex. A [Stipulation
for Entry of Final Judgment and Permanent Injunction entered on January 13,
2022 ,in the matter of the People of the
State of California v. Navient Corporation, et al., San Francisco Superior
Court Case No. CGC-18-567732]; see Evid. Code § 452(d).)
First Cause of
Action
Defendant argues that the PSLCRA claim fails because Plaintiff cannot
invoke the statute “on a retroactive basis.” However, Defendant does not demonstrate
Plaintiff is attempting to apply the PSLCRA retroactively in this case.
The PSLCRA requires that a “private education lender or a private
education loan collect to shall not make any written statement to a debtor in
an attempt to collect a private education loan unless the private education
lender or private education loan collector possesses [specified] information .
. ..” (Civ. Code § 1788.202(a).) The statute lists the information required, which
includes basic information about the private education loans. “Private
education loan” means an extension of credit that “(1) Is not made, insured, or
guaranteed under Title IV of the Higher Education Act of 1965 (20 U.S.C. Sec.
1070 et seq.)”; “(2) Is extended to a consumer expressly, in whole or in part,
for postsecondary educational expenses, regardless of whether the loan is
provided by the educational institution that the student attends”; (3) Does not
include open-end credit or any loan that is secured by real property or a
dwelling; or (4) “Does not include an extension of credit in which the covered
educational institution is the original creditor if either: (A) The term of the
extension of credit is 90 days or less [and] (B) An interest rate will not be
applied to the credit balance and the term of the extension of credit is one
year or less, even if the credit is payable in more than four installments.”
(Civ. Code § 1788.201(i).)
“Private education lender” means
“Any person or entity engaged in the business of securing, making, or extending
private education loans” or “Any holder of a private education loan.” (Civ.
Code § 1788.201(h).) “Private education loan collector”
means “a person, other than a private education lender, collecting or
attempting to collect on a defaulted private education loan.” (Civ. Code §
1788.201(k).)
The statute further requires that
private education lenders and loan collectors provide that information in two
circumstances: (1) “in the first written collection communication with a debtor
after the first of either of the following: (A) Default and acceleration. [or] (B)
A period of 12 consecutive months of default” or (2) “to the debtor upon the
debtor's request if both of the following are true: (A) An event described in
subparagraph (A) or (B) of paragraph (1) has occurred [and] (B) The debtor has
not requested or received the information set forth in subdivision (a) within
the previous 12 months.” (Civ. Code § 1788.202(b)(1)-(2).)
Plaintiff alleges that on July 1,
2022, she sent Defendant a request for information pursuant to the PSLCRA about
the subject loan. (Compl., ¶ 45.) Plaintiff requested information enumerated by
Civil Code section 1788.202(a), including the name of the owner of the loan, an
itemization of interest and fees, the date of her first missed payment, the
date of her last payment, the names of all the entities that have owned the
loan since her default, documentation showing the chain of ownership, a copy of
the loan contract, and records of collection attempts made within the previous
year. (Id.) Defendant did not respond to this request at all. (Compl., ¶ 47.) Instead,
Defendant continued to send collection letters and placed collection calls.
(Compl., ¶ 48.) Plaintiff sent a follow up letter on August 1, 2022, demanding
the same information. (Compl., ¶ 49.) Defendant responded to this letter, but
did not provide the requested information. (Compl., ¶¶ 50-53.) Following meet
and confer efforts, Defendant provided a further response on October 20, 2022,
which did not include the requested information, such as the name of the owner,
the name of previous owners, assignment and transfer documentation, payment
information, interest and fee information, or a list of collection attempts.
(Compl., ¶¶ 57-61.) Defendant would only provide a log of collection calls if
Plaintiff would provide the phone numbers called, which is not required by the
PSLCRA. (Compl., ¶58.) Plaintiff sent another letter on November 3, 2022,
informing Defendant that they were in violation of PSLCRA, satisfying the
notice requirement of the PSLCRA. (Compl., ¶ 62-64.) Defendant failed to
respond or cure the violations after receiving the notice, and never fully
provided the requested information. (Compl., ¶¶ 65-73; see ¶¶82-83.)
Under these facts, Defendant has a current duty to maintain the
enumerated information in its records. Defendant contends, without support,
that it was not required to “already” have the documents on hand because the
statute only applies to loans where servicing commenced before July 1, 2022. Defendant
does not cite any statutory language which would suggest that the statute would
be limited as to loans “where servicing commenced” before July 1, 2022. Defendant points to no statutory language
which suggests that the statute would only apply to loans made or serviced
after a certain date. As of the effective date, private education loan collectors must maintain the records
specified, or be unable to collect on the private student loan debt. There is
nothing “retroactive” about this obligation. Plaintiff is not attempting to hold Defendant liable for its failure to
comply with PSLCRA prior to the effective date. Rather, Plaintiff alleges that,
after the effective date, Defendant, as her private student lender/collector, failed
to provide requested information as required by the PSLCRA.
Accordingly, Defendant’s demurrer is OVERRULED as to the first cause of
action.
Third Cause of
Action
Defendant argues that the Complaint does not establish that it engaged in
debt collection activity in violation of the RFDCPA. Defendant elaborates that the basis of
Plaintiff’s claims is that all five of her loans met the criteria for discharge
set forth in the Final Judgment and Permanent Injunction (“Judgment”) agreed to
between NSL and the California Attorney General. (See RJN, Ex. A.) That
Judgment required that the subject debt was in default and had charged off by
June 30, 2021. Defendant asserts that, under the Judgment, the subject loan
does not meet the criteria, since it was not in default and charged off by June
30, 2021. Defendant explains that her private loan was not continuously delinquent
as of December 2017, such that any collection efforts would have been
time-barred as of December 2021. Defendant states that this was not the case
because Defendant itself applied forbearances to her loan for “various periods
of time,” which kept the debt out of default and extended the statute of
limitations.
Of course, the Complaint does not allege that Defendants applied
forbearances such that the debt was not in default by June 30, 2021. Such facts
are extrinsic to the complaint and cannot be considered on demurrer. At best,
Defendant cites allegations that, during pre-litigation discussions, it contended
the subject loan “did not qualify for discharge [under the Judgment] as it did
not default and charge off due to nonpayment like [Plaintiff’s] remaining loans”
and that the loan did “not charge off in the requisite timeframe because of
payment pauses that were applied through her use of forbearances and
deferments.” (Compl., ¶¶ 53, 59.) The Complaint does not allege that
forbearances applied at all. The Complaint only states Defendant’s contentions
and does not suggest that the contentions were true. In fact, the complaint expressly
states that such representations were false because “Plaintiff never requested
any of these deferments or forbearances” and that “the promissory note that
allegedly governs this account does not provide for any of these deferments or
forbearances”. (Compl., ¶¶60-61.) Thus, Defendant cannot rely on the
alleged representations as statements of fact.
Furthermore, Defendant ignores the substantive allegations presented in
the third cause of action which do not relate to the validity of the subject
loan. The purpose of the RFDCPA is to
“prohibit debt collectors from engaging in unfair or deceptive acts or
practices in the collection of consumer debts and to require debtors to act
fairly in entering into and honoring such debts, as specified in this title.”
(Civ. Code, § 1788.1.) A “debt collector” under the RFDCPA is “any person who,
in the ordinary course of business, regularly, on behalf of himself or herself
or others, engages in debt collection.” (Civ. Code, § 1788.2(c).) A “debt
collection” is “any act or practice in connection with the collection of
consumer debts.” (Civ. Code, § 1788.2(b).) A “consumer debt” is “money,
property or their equivalent, due or owing or alleged to be due or owing from a
natural person by reason of a consumer credit transaction.” (Civ. Code, §
1788.2(f).) A “consumer credit transaction” is a “transaction between a natural
person and another person in which property, services or money is acquired on
credit by that natural person from such other person primarily for personal,
family, or household purposes.” (Civ. Code, § 1788.2(e).)
Harassment can be grounds for alleging a violation of the
Rosenthal Act. (See CCP § 1788.11(e) [“Communicating, by telephone or in
person, with the debtor with such frequency as to be unreasonable and to
constitute a harassment to the debtor under the circumstances.”].) Additionally, the RFDCPA expressly incorporates the FDCPA’s
standards. (CCP § 1788.17; Alborzian v. JPMorgan Chase Bank, N.A. (2015)
235 Cal.App.4th 29, 36.) The FDCPA prohibits a debt collector from “‘us[ing]
any false, deceptive, or misleading representation or means in connection with
the collection of any debt’ (15 U.S.C. § 1692e), and . . . specifically
prohibits ‘[t]he false representation of . . . the character, amount or
legal status of any debt’ (§ 1692e, subd. (2)(A)), ‘[t]he threat to take any
action that cannot legally be taken or that is not intended to be taken’ (§
1692e, subd. (5)), and ‘[t]he use of any . . . deceptive means to collect or
attempt to collect any debt . . .’ (§ 1692e, subd. (10)).” (Alborzian, supra,
235 Cal.App.4th at 36.)
Plaintiff alleges that she is a ‘debtor’ as defined by Civil Code section
1788.2(h), that Defendant is a ‘debt collector’ as defined by Civil Code §
1788.2(c), and that subject loan is a ‘consumer debt’ as defined by Civil Code
§ 1788.2(f). (Compl., ¶¶ 109-111.)
Defendant violated the RFDCPA by the
following conduct:
a. Navient caused Ms. Moreno’s
telephone to ring repeatedly and continuously
annoyed her in violation of Civil Code § 1788.11(d);
b. Navient communicated with Ms.
Moreno by telephone with such frequency as to be unreasonable and to constitute
harassment under the circumstances in violation of Civil Code § 1788.11(e);
c. Navient sent written
communications to Ms. Moreno in an attempt to collect a time-barred debt
without providing the notices required by Civil Code §1788.14(d);
d. Navient engaged in conduct the
natural consequence of which is to harass, oppress, and abuse Ms. Moreno in
connection with the collection of a debt, including by causing her telephone to
ring repeatedly and continuously with intent to annoy, abuse, or harass her, in
violation of Civil Code § 1788.17 (incorporating 15 U.S.C. §§ 1692d, 1692d(5));
e. Navient made and used false,
deceptive, and misleading representations in an attempt to collect the alleged
debt from Ms. Moreno in violation of Civil Code § 1788.17 (incorporating 15
U.S.C. § 1692e);
f. Navient misrepresented the
character, amount, or legal status of the alleged debt in violation of Civil
Code § 1788.17 (incorporating 15 U.S.C. § 1692e(2)(A)); and
g. Navient attempted to collect a
debt that is known by Navient to be barred by the applicable statute of
limitations in violation of Civil Code § 1788.17 (incorporating 15 U.S.C. §§
1692e, 1692e(5), 1692e(10), and 1692f).
(Compl., ¶ 112; see ¶ 71.) Defendant does not address these
other bases of liability. Such conduct may be taken as deceptive or
unreasonable debt collection practices, whether or not the Judgment applies to
the subject loan.
Accordingly, Defendant’s demurrer
is OVERRULED.
Fourth Cause of
Action
Defendant argues that the claim for declaratory relief fails because
Plaintiff knew or should have known the facts giving rise to any claim against her
school a long time ago and, thus, the claim is time-barred. CCP section
1060 provides that a person may bring an action for declaratory relief if he or
she “desires a declaration of his or her rights or duties with respect to
another, or in respect to, in, over or upon property . . ..” (CCP, § 1060.) A
plaintiff must allege a proper subject of declaratory
relief and an actual controversy involving justiciable questions relating to
the party’s rights or obligations. (Jolley v. Chase Home Finance, LLC
(2013) 213 Cal.App.4th 872, 909.) The validity of a contract is a proper
subject of declaratory relief. (CCP § 1060.)
The Complaint establishes a judiciable controversy between the parties. The
complaint requests declaratory relief that the subject loan is unenforceable,
more specifically: “A controversy exists between Ms. Moreno and Defendants as
to whether the alleged private student debt Defendants have attempted to
collect from Ms. Moreno is valid and enforceable, or whether it was induced
through fraud and misrepresentations and is therefore not enforceable.”
(Compl., ¶ 121.) Defendant has threatened to sue her on the subject loan.
(Compl., ¶¶ 9, 43.) Plaintiff contends that the debt is unenforceable because
it is time-barred, because it should have been discharged pursuant to a prior
settlement, and because it was induced through fraud. (Compl., ¶¶ 2, 3,
121-123.) As such, Plaintiff alleges a live, prospective controversy between
herself and Defendant as to the enforceability of the subject loan.
Defendant contends that the three-year statute of limitations would apply
because the declaratory relief cause of action sounds in fraud. (See Bank of New York Mellon v. Citibank, N.A.
(2017) 8 Cal.App.5th 935, 943 [“A claim for declaratory relief is subject to
the same statute of limitations as the legal or equitable claim on which it is
based”].) However, there are no alleged facts to support the application of the
statute of limitations here. (See Lockley v. Law Office of Cantrell, Green,
Pekich, Cruz & McCort (2001) 91 Cal.App.4th 875, 881 [unless a
complaint affirmatively discloses on its face that the statute of limitations
has run, demurrer must be overruled]; see also April Enterprises, Inc. v.
KTTV (1983) 147 Cal.App.3d 805, 832 [under the discovery rule, the period
is tolled until a plaintiff discovers, or has reason to discover, the cause of
action].) Defendant merely notes that Plaintiff completed school in 2011 and
ceased paying her private student loans in 2017. (Compl., ¶¶ 27, 35.) Neither
fact suggests that the stated causes of action accrued at any point in
particular. The complaint also does not allege when Plaintiff discovered that
the loans were induced via fraud, rendering this argument speculative. Notably,
the sought declaration pertains to Defendants collection actions in 2022, less
than 3 years prior to this action’s filing date. Thus, at least a portion of this
cause of action would survive even if the court were to apply the three-year
statute of limitations.
At worst, Plaintiff would be entitled to a
negative declaration. “In general, if a
complaint for declaratory relief alleges the existence of an actual controversy
. . ., the court should not sustain a general demurrer on the theory that any
declaration would necessarily be adverse to the plaintiff.” (Teachers
Management & Investment Cop. v. City of Santa Cruz (1976) 64 Cal.App.3d
438, 449.)
Accordingly, the demurrer is OVERRULED.
Defendant to file an answer within 10 days.