Judge: Mark H. Epstein, Case: 21SMCV01405, Date: 2022-10-24 Tentative Ruling
Case Number: 21SMCV01405 Hearing Date: October 24, 2022 Dept: R
Preliminarily, the Court GRANTS the requests for judicial notice of court pleadings and filings. However, the truth of allegations or statements made therein is not considered by the Court unless it has jural effect.
This case stems from plaintiff’s attempt to stop foreclosure proceedings. The gist of plaintiff’s claim is that while plaintiff was in bankruptcy court, the parties entered into an agreement to reduce the loan principal and reform certain aspects of the loan and further agreed that if plaintiff made the revised payments, the loan would be in good standing and, upon payment of the final installment, the loan would be deemed repaid. Plaintiff contends that it has tried to abide by that agreement but defendant refuses to accept payments under the agreement’s terms. Defendant contends that the parties entered into a stipulation and agreement that expressly required that it be approved by the bankruptcy court to be effective. The bankruptcy action was dismissed on motion of the creditors and the proposed stipulation was never approved by the court nor was a plan ever adopted. (The bankruptcy court did not expressly reject the stipulation either.)
The Court earlier heard a motion for a preliminary injunction on this point. Plaintiff’s motion for preliminary injunction was denied because the Court, upon review of the evidence submitted by both parties, concluded that defendant’s reading was correct. The Court used some very strong language in that order, much of which is quoted in defendant’s moving papers here. Defendant now brings a motion for judgment on the pleadings making the same argument and relying on the Court’s language in the preliminary injunction order.
Notwithstanding the Court’s language, it is black-letter law that in deciding whether to issue a preliminary injunction, the Court can weigh the conflicting evidence presented. And, of course, evidence must be presented; the motion cannot be resolved on allegations in pleadings alone unless the allegations are admitted. In sharp contrast, a motion for judgment on the pleadings is akin to a demurrer. The Court must accept the factual allegations in the complaint as true unless they are rebutted by facts of which the Court can take judicial notice. Here, the Court looks to the allegations in the complaint, but that includes the underlying documents upon which the complaint relies, including the loan agreement and also the bankruptcy court agreement.
It is also black-letter law that a court’s determination on preliminary injunction is just that: preliminary. The court can reach a different conclusion following trial and nothing in the preliminary injunction order is binding on the court’s later rulings on the merits. Accordingly, nothing in the preliminary injunction order is “law of the case” or akin to it. (In California, nothing the trial court does is law of the case anyway. Law of the case is reserved to determinations made by an appellate court.)
Given that, plaintiff has the better of the argument. Plaintiff’s point is that the Court must disregard its findings at the preliminary injunction stage and look only at the pleadings (including the underlying documents). If those documents can possibly be read in plaintiff’s favor, then the pleading motion must be denied. In that regard, plaintiff argues that even if the Court believes that defendant’s reading is the more natural (and plaintiff does not concede that defendant’s reading is in fact the more natural), that is not enough. Plaintiffs argue that if parol evidence could potentially be introduced that would cause the Court to agree with plaintiff, the motion must be denied. The Court agrees. And so, the Court conducted a thought experiment. What if plaintiff had evidence of an email exchange before the agreement was signed in which plaintiff wrote “Just to be clear, this is binding on us both unless the bankruptcy court actually issues a formal order rejecting the agreement, right? So even if the bankruptcy case is dismissed tomorrow with no action being taken on our agreement, it is still binding on us both, right?” And defendant’s counsel wrote back: “Exactly right.” Would that be enough? The answer is that it would be enough to find in plaintiff’s favor unless the contract’s language is so clear that the words simply are not reasonably susceptible to the meaning ascribed to them in that exchange. And the Court cannot quite go that far, notwithstanding what it wrote in the preliminary injunction order. Of course, none of the preliminary injunction evidence included an email exchange anything like the one posited in the Court’s hypothetical, and the Court very much doubts anything like such evidence exists. But proof of the proposed parol evidence to support plaintiff’s interpretation is not required at this stage.
Because the Court cannot rule out the possibility that plaintiff will introduce sufficient evidence to support its reading, the Court cannot grant the motion. The Court is, of course, well aware that it is quite likely that plaintiff has already fired its best arrow in the preliminary injunction papers. But that awareness cannot be indulged now. For the same reason, the motion fails regarding declaratory relief.
The Court also believes that the motion cannot be granted as to the UCL cause of action. The complaint seems to allege at least unfair conduct. While the Court recognizes that there is a split of authority on the appropriate test for unfair conduct in consumer actions (Drum v. San Fernando Valley Bar. Assn. (2020) 182 Cal.App.4th 247), here defendants rely on the “FTC” test, which requires that the injury be substantial, not outweighed by any countervailing benefits to consumers or competition, and be an injury to the consumers themselves that could not reasonably be avoided. (Davis v. Ford Motor Credit Co., LLC (2009) 179 Cal.App.4th 581.) But defendant’s argument misses the point. The issue is consumer injury and plaintiff is the purported consumer. This is best resolved at the summary judgment stage or at trial, not on a pleading motion.
On wrongful foreclosure, defendant contends that even were the stipulation enforceable plaintiff failed to tender the full amount due to stop the foreclosure. The Court disagrees that this argument can prevail on a pleading motion. In paragraph 13, plaintiff alleges that it is tendering all sums “which may be due from Plaintiff to Defendants under the Stipulation. . . . Plaintiff is ready, able and willing to tender or cause to be tendered to Defendants those sums, if any, that the court finds due and owing from Plaintiff to Defendants.” Defendants state that such an offer is not sufficient because it is only an offer to tender, not a tender, and that was indeed a fair reading of the case upon which defendants rely, Stebley v. Litton Loan Servicing, LLP (2011) 202 Cal.App.4th 522. However, other cases differ. (See Turner v. Seterus, Inc. (2018) 27 Cal.App.5th 516.) In this case, the Court will side with plaintiff on this pleading motion. Given the dispute as to how much of a tender would be required to cure the problem, the Court will consider the pleading sufficient at this stage and thus the motion as to the wrongful foreclosure cause of action is DENIED.
The motion is GRANTED as to the cause of action for injunctive relief. An injunction is a remedy, not a cause of action. That said, the Court will not preclude plaintiff from seeking an injunction if plaintiff prevails on another cause of action.
In short, defendant’s position is better tested by way of summary judgment. Accordingly, the motion is DENIED (except as to the preliminary injunction cause of action). Obviously, it is without prejudice to any summary judgment motion or to any position defendant might take at trial.