Judge: Mark H. Epstein, Case: 22SMCV02460, Date: 2023-02-28 Tentative Ruling
Case Number: 22SMCV02460 Hearing Date: February 28, 2023 Dept: R
The demurrer is SUSTAINED WITH LEAVE TO AMEND IN PART AND
OVERRULED IN PART.
Plaintiff Joan Rebecca
Siregar (“plaintiff”) filed a wrongful foreclosure action against defendants
Sam Ostayan, Cenlar FSB, and Clear Recon Corp.
According to the operative complaint, in November 2003, plaintiff’s
husband Robert Long purchased the property for $545,000 and there were two
deeds of trust in favor of Chase Manhattan Mortgage Company. (Compl., ¶9.) In 2005, Long quitclaimed the property to the
Robert L. Long Revocable 2005 Trust. (Id.
at ¶10.) Long paid off the second loan
to Chase in March 2007. (Id. at
¶11.) Plaintiff claims Long obtained a
HELOC with Citibank with a maximum cap of $150,000 and he borrowed $123,500 of
that amount. (Id. at ¶12.) Plaintiff states she married Long in August
2009 and he passed away in August 2016.
(Id. at ¶¶13-14.) In
February 2017, the Long Trust transferred title of the property to
plaintiff. (Id. at ¶15.) Plaintiff contends she began the process of
refinancing the property, including the HELOC, with CITI in May 2018. (Id. at ¶16.) Plaintiff states that CITI informed her in
October 2019 that the servicer had changed to Cenlar. (Id. at ¶17.) CITI purportedly assured plaintiff that all
the information confirming her as successor in interest and her refinancing
process would be passed on to Cenlar. (Ibid.)
Plaintiff contends that
the foregoing assurance was false.
(Compl., ¶18. ) CITI recorded a second Notice of Default (“NOD”) and
Substitution of Trustee while it was working with plaintiff on refinancing the
property. (Ibid.) Plaintiff asserts she was not given notice of
the NOD and change in who her servicer was for months because the letters were
sent to an address in Washington DC that Long sold in 2018. (Id. at ¶19.) Cenlar recorded a Notice of Trustee’s Sale on
December 30, 2019, even though plaintiff believed she was still working on
refinancing the property with CITI. (Id.
at ¶20.) Plaintiff claims she became
aware of the notice only because it was taped to the front gates of her
condominium. (Id. at ¶21.)
In September 2019, Cenlar
allegedly began refusing plaintiff’s payments on the HELOC but continued
sending loan modification correspondence to the DC address. (Compl., ¶23.) Plaintiff states she eventually learned of
the error and updated Cenlar, but it only updated the city, not the street
address. (Ibid.) Plaintiff claims
the issue was not resolved until April 2020.
(Ibid.) Plaintiff submitted
repayment plans to Cenlar on three different occasions from May to July 2020,
but it allegedly continued to refuse payment while also sending her letters
encouraging her to apply for loan modification.
(Id. at ¶¶24-25.) In
September 2020, Cenlar supposedly cut plaintiff’s access to the portal
entirely, which prevented her from viewing her bills and attempting to submit
payments. (Id. at ¶26.)
In January 2022, plaintiff
received a letter indicating that her loan modification application was complete. (Compl., ¶27.) But shortly thereafter, plaintiff asserts she
received another letter stating that the modification was incomplete. (Id. at ¶28.) In March 2022, plaintiff received another
letter indicating her loan modification was complete, but she then received a
follow-up requesting additional documents with a deadline of April 22. (Id. at ¶29.) Plaintiff contends that on April 27, she
re-uploaded her application and every single document due to a letter on
Cenlar’s loss mitigation portal that asked to submit another packet of
documents. (Id. at ¶30.) Plaintiff states Cenlar informed her that her
application was incomplete on April 29 but the missing itemized documents had
already been uploaded on April 27. (Id.
at ¶31.) The letter gave a deadline of
May 29 to submit certain documents. (Ibid.) However, on May 24, before the deadline had
passed, Cenlar foreclosed. (Id.
at ¶32.)
Defendant Ostayan acquired
the property through the foreclosure sale by allegedly falsely claiming that he
was an eligible bidder for the property as a “prospective owner occupant” under
SB-1079’s statutory scheme for nonjudicial foreclosures of properties
containing one to four residential units.
(Compl., ¶¶35, 38.) Plaintiff
claims Ostayan submitted a false affidavit indicating that he would move into
the property within 60 days and would occupy it as his primary residence for at
least a year, but that in fact this was the thirteenth property he had
purchased at a foreclosure sale within the past year by claiming he was an
eligible bidder. (Id. at
¶¶40-41.)
Plaintiff asserts the
following causes of action: (1) wrongful foreclosure against Cenlar and CRC;
(2) promissory estoppel against Cenlar; (3) intentional interference with
prospective economic advantage against Ostayan; (4) quiet title against all
defendants; (5) injunctive relief against all defendants; and (6) violation of
the UCL against all defendants.
Currently before the court is Cenlar’s demurrer. There is no opposition. However, that does not automatically mean the
court will sustain the demurrer.
Cenlar requests judicial
notice of 16 recorded documents regarding the property. The request is GRANTED in full. (See Evid. Code, § 452, subds. (b)-(c).) The court notes that it does not take
judicial notice of the truth of the matters stated therein but does take notice
of any jural effect of the documents and the notice they provide.
With that, the court turns
to the merits. Cenlar demurs to the
entire complaint, as well as the first, second, fourth, fifth, and sixth causes
of action on the grounds of failure to state sufficient facts and
uncertainty. (See Code Civ. Proc., §
430.10, subds. (e), (f).) As a
preliminary matter, “demurrers for uncertainty are disfavored, and are granted
only if the pleading is so incomprehensible that a defendant cannot reasonably
respond.” (Lickiss v. Fin. Industry
Regulatory Authority (2012) 208 Cal.App.4th 1125, 1135.) A demurrer for uncertainty does not address
whether the pleading fails to “incorporate sufficient facts in the pleading but
is directed at the uncertainty existing in the allegations actually made.” (Butler v. Sequeira (1950) 100
Cal.App.2d 143, 145-146.) The only
arguments asserted by Cenlar pertain to the ground of failure to state
sufficient facts. Thus, the demurrers
for uncertainty are unsubstantiated and OVERRULED.
Demurrer to the Entire
Complaint. Cenlar argues that the entire complaint fails
because plaintiff is not a borrower under the HELOC and does not currently have
record title interest in the subject property.
The court is not persuaded by this argument. Allegations in the complaint support a
reasonable inference that plaintiff was assigned or assumed Long’s obligations
under the HELOC, including payments.
(See Compl., ¶22 [“In September 2019, Defendant CENLAR began refusing
payments by Plaintiff to the HELOC”].)
The inference is that she had previously been making payments on the
HELOC and that those payments were received without complaint.
However, the inference
alone is not quite enough. Cenlar
correctly asserts that an agreement for plaintiff to take over the loan needs
to be in writing to be enforceable.
Pursuant to Civil Code section 1624, subdivision (a)(6), “[t]he
following contracts are invalid, unless they, or some note or memorandum
thereof, are in writing and subscribed by the party to be charged or by the
party's agent: [¶] (6) An agreement by a purchaser of real property to pay an
indebtedness secured by a mortgage or deed of trust upon the property
purchased, unless assumption of the indebtedness by the purchaser is
specifically provided for in the conveyance of the property.” “Upon the transfer of real property covered
by a mortgage or deed of trust as security for an indebtedness, the property
remains subject to the secured indebtedness but the grantee is not personally
liable for the indebtedness or to perform any of the obligations of the
mortgage or trust deed unless his agreement to pay the indebtedness, or some
note or memorandum thereof, is in writing and subscribed by him or his agent or
his assumption of the indebtedness is specifically provided for in the
conveyance. (Civ.Code, s 1624, subd. 7;
Snidow v. Hill (1948) 87 Cal.App.2d 803, 806—807.)” (Cornelison v. Kornbluth
(1975) 15 Cal.3d 590, 596–597, parallel citations omitted.)
Plaintiff does not allege
the existence of any written agreement indicating she agreed to assume the
obligations to pay the mortgage, although the court would hardly be surprised
were one to exist. Thus, according to
Cenlar, she does not have standing to bring the claims related to the
mortgage. With that said, this is a
curable defect. The court therefore SUSTAINS the demurrer on this basis and
GRANTS leave to amend. Plaintiff can
amend the complaint to allege that she, as trustee, has standing. And the court frankly doubts that this
problem is incurable. Taken to its
logical conclusion, the argument would be that no one has any obligation to
repay the loan, and if no one has any obligation to repay the loan there is at
least a question in the court’s mind as to whether the lender can foreclose on
the security for the loan, which calls the whole case into question. The more likely result is that
plaintiff—either personally or as trustee or perhaps even both—did have an
obligation to repay the loan and the lender’s security interest is valid and
enforceable if done properly. At least
as a pleading matter, the parties seemed to act in that fashion for a
significant period of time. The court
will give plaintiff the opportunity to plead this properly. Relatedly, Cornelison is based on the
Statute of Frauds. While the doctrine is
certainly valid, the Statute of Frauds has many exceptions and it is far from
clear that no exception applies here. Further,
of course, the Statute of Frauds is designed to protect people like
plaintiff—that is, a person against whom the creditor wants to enforce the
debt—by requiring the putative debtor to have put the obligation to assume the
debt in writing. It was not meant to
protect the creditor from those who are attempting to repay or be bound to the
debt.
Wrongful Foreclosure. “A wrongful foreclosure is a common law tort
claim. It is an equitable action to set aside a foreclosure sale, or an action
for damages resulting from the sale, on the basis that the foreclosure was
improper. (See Miles, supra, 236
Cal.App.4th at pp. 408–409. ) [¶] The
elements of a wrongful foreclosure cause of action are: ‘ “(1) [T]he 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.” ’ (Id. at p. 408.)” (Sciarratta v. U.S. Bank National Assn.
(2016) 247 Cal.App.4th 552, 561–562, parallel citations omitted.)
Cenlar asserts it is
neither the trustee nor the mortgagee that caused the purportedly wrongful
sale, but rather is merely the servicer of the loan. It contends
that it therefore cannot be sued for this tort. Aside from setting forth the elements of the
claim, Cenlar cites no authority affirmatively holding that a loan servicer can
never be sued for wrongful foreclosure.
The court is generally aware of a few cases that have permitted wrongful
foreclosure claims against servicers to proceed. (See, e.g., Turner v. Seterus, Inc.
(2018) 27 Cal.App.5th 516; Barroso v. Ocwen Loan Servicing, LLC (2012)
208 Cal.App.4th 1001.) That said,
reading the argument as one based more in causation—that Cenlar did not cause
the wrongful foreclosure because it is merely the servicer—the result might be
different. The court therefore does not
foreclose the possibility of an MJOP or motion for summary judgment on this
question.
Cenlar next asserts that
plaintiff has not been prejudiced or harmed by the sale because she is not a
borrower, mortgagor, or obligor. Cenlar
notes that she alleged that she transferred her entire interest in the property
to Joan Rebecca Siregar, as Trustee of the JRS Revocable Trust on June 11,
2018. This is true but is an easily
curable defect, if indeed it is a defect at all. The court notes that plaintiff can also
include allegations regarding whether she and her husband made joint/community
property payments on the HELOC. That
will confer standing on the tort claims.
As the Turner court stated:
We agree with plaintiffs
that the allegations of the third amended complaint are sufficient to establish
that the community had an interest in the property. The complaint alleges that
‘both Plaintiffs contributed financially to the monthly payments on the Subject
Loan.’ Construed liberally, we take this
allegation to mean that both parties contributed their community property
earnings during the marriage to payments on the loan principal, which, under
California community property law, gave the community an interest in what was
otherwise Turner's separate property.
(See, e.g., Bono v. Clark (2002) 103 Cal.App.4th 1409, 1421-1422
[‘[w]hen community property is used to reduce the principal balance of a
mortgage on one spouse's separate property, the community acquires a pro tanto
interest in the property’].)
Because, under the
allegations of the third amended complaint, the community had an interest in
the property, at the very least Zeleny, as a member of the community, had
standing to pursue the tort causes of action asserted in the complaint to the
extent those causes of action alleged that Seterus's conduct resulted in the
loss of the property -- and, as a result, the community's interest therein. ‘
“Every action must be prosecuted in the name of the real party in interest,
except as otherwise provided by statute.”
(Code Civ. Proc., § 367.) The
real party in interest has “ ‘an actual and substantial interest in the subject
matter of the action,’ and stands to be ‘benefited or injured’ by a judgment in
the action.” [Citation.] “Plaintiffs
have standing to sue if they or someone they represent have either suffered or
are threatened with an injury of sufficient magnitude to reasonably assure the
relevant facts and issues will be adequately presented.” ’ (Fladeboe v. American Isuzu Motors Inc.
(2007) 150 Cal.App.4th 42, 54-55.) As a
member of the community, which had an interest in the property, Zeleny has an
actual and substantial interest in recovering tort damages for the loss of that
property and stands to be benefitted by a judgment in this action. Accordingly, the fact that Zeleny was not a
party to the note and deed of trust on the property does not deprive him of
standing in this action, and the trial court erred in concluding otherwise.
(Turner, supra, 27
Cal.App.5th at pp. 524–525, parallel citations omitted.)
Cenlar also contends that
plaintiff has not alleged tender of the outstanding amount due on the
HELOC. It notes that tender is required
where the plaintiff seeks to redeem a property due to irregularities in the sale. “The tender rule arose in the context of
redemption cases where the plaintiffs sought to set aside the trustee's sale
for irregularities in the foreclosure sale notice or procedure. (See, e.g., Arnolds Management Corp. v.
Eischen, supra, 158 Cal.App.3d 575 [defect in notice of sale]; Karlsen
v. American Sav. & Loan Assn., supra, 15 Cal.App.3d 112 [trustee sold
property to corporation in which trustee was financially interested].) ‘ “The rationale behind the [tender] rule is
that if [the borrower] could not have redeemed the property had the sale
procedures been proper, any irregularities in the sale did not result in
damages to the [borrower].” ’ (Lona
v. Citibank, N.A., supra, 202 Cal.App.4th at p. 112.) ‘Allowing [borrowers] to recoup the property
without full tender would give them an inequitable windfall, allowing them to
evade their lawful debt.’ (Stebley v.
Litton Loan Servicing, LLP (2011) 202 Cal.App.4th 522, 526.) Thus, the tender rule is based on the theory
that one who is relying upon equity in overcoming a voidable sale must show
that he is able to perform his obligations under the contract so that equity
will not have been employed for an idle purpose. (Dimock v. Emerald Properties (2000)
81 Cal.App.4th 868, 878; Arnolds Management Corp., at pp. 578-579 [court
of equity will not order performance of a ‘useless act’].)” (Turner, supra, 27 Cal.App.5th at p.
528, parallel citations omitted.) But
plaintiff explicitly alleges that she had completed multiple loan modification
applications while Cenlar otherwise proceeded with the foreclosure
process. She was purportedly given the
run-around by Cenlar on the sufficiency of her application as well. That is dual tracking. “The purpose of the modification rules is to
avoid a foreclosure despite the borrower being incapable of complying with the
terms of the original loan. It would be
contradictory to require the borrower to tender the amount due on the original
loan in such circumstances. Moreover,
the purpose of the tender rule is to dismiss suits at an early stage, where,
despite any irregularities in the lender's foreclosure activities, the borrower
will ultimately have to pay the amount due on the loan, but cannot do so. Such
suits are essentially futile. This is
not such a case, as a loan modification is an alternative to foreclosure that
does not require the borrower to pay pursuant to the terms of the original
loan.” (Majd v. Bank of America, N.A.
(2015) 243 Cal.App.4th 1293, 1306; see also, Mabry v. Superior Court
(2010) 185 Cal.App.4th 208, 225–226 [fuller discussion of why full tender is
not required in loan modification situations].)
In other words, the court looks to the purpose underlying the tender
rule to determine its application. The
theory was that where there was a relatively technical defect or irregularity
in the foreclosure sale, the former owner could not undo the sale, take the
property back from the buyer, and sue the trustee where the former owner could
not cure the underlying problem. Where,
however, the defect is that the sale should not have gone forward in the first
place because the owner was in the process of curing the problem for less than
a 100% tender of the full debt, applying the tender rule makes no sense, and it
certainly makes no sense as an equitable matter.
Further, given plaintiff’s
allegations, the court believes this is one of the situations where tender of
the full amount would be unjust.
“Recognized exceptions to the tender rule include when: (1) the
underlying debt is void, (2) the foreclosure sale or trustee's deed is void on
its face, (3) a counterclaim offsets the amount due, (4) specific circumstances
make it inequitable to enforce the debt against the party challenging the sale,
or (5) the foreclosure sale has not yet occurred. (Id. at pp. 112–113 [outlining the
first four exceptions]; Pfeifer v. Countrywide Home Loans, Inc. (2012)
211 Cal.App.4th 1250, 1280–1281 [recognizing the fifth exception].)” (Chavez v. Indymac Mortgage Services
(2013) 219 Cal.App.4th 1052, 1062, parallel citations omitted.) As discussed above, this case may well fall
into one or more of these categories.
The court is not fully convinced that such is the case, but on this
pleading motion the court will give plaintiff the benefit of the doubt.
Accordingly, the demurrer
is SUSTAINED WITH LEAVE TO AMEND for plaintiff better to allege standing but
OVERRULED in all other respects.
Promissory Estoppel. Cenlar recycles its standing argument here
and it is SUSTAINED WITH LEAVE TO AMEND for the same reasons discussed
above. Cenlar further argues that
plaintiff only alleges the existence of a gratuitous oral promise and does not
specifically allege all the elements. “
‘ “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.’ ” ‘ (Advanced Choices, Inc. v. State Dept. of
Health Services (2010) 182 Cal.App.4th 1661, 1672.)” (Aceves v. U.S. Bank, N.A. (2011) 192
Cal.App.4th 218, 225, parallel citations omitted.) “To be enforceable, a promise need only be ‘
“definite enough that a court can determine the scope of the duty[,] and the
limits of performance must be sufficiently defined to provide a rational basis
for the assessment of damages.” ’ (Bustamante
v. Intuit, Inc., supra, 141 Cal.App.4th at p. 209, quoting Ladas v.
California State Auto. Assn. (1993) 19 Cal.App.4th 761, 770.)” (Garcia v. World Savings, FSB (2010)
183 Cal.App.4th 1031, 1045, parallel citations omitted.) “ ‘Estoppel cannot be established from . . .
preliminary discussions and negotiations.’
(National Dollar Stores v. Wagnon (1950) 97 Cal.App.2d 915,
919.)” (Id. at p. 1044, parallel
citations omitted.)
Plaintiff here is
explicitly relying on a written letter promising not to foreclose pending
receipt of the loan modification documents.
She alleges that in the midst of discussions and after stating that her
modification application was complete, “two days later, on April 29, 2022,
Defendant CENLAR sent another letter to Plaintiff claiming her application was
incomplete. The ‘missing documents’ itemized
in the letter were ones Plaintiff already uploaded on April 27, 2022. This letter gave her until May 29, 2022. [¶] On May 24, 2022, prior to the May 29
deadline CENLAR had given Plaintiff, Defendant CENLAR foreclosed.” (Compl.,
¶¶31-32.)
Accordingly, the demurrer
is SUSTAINED WITH LEAVE TO AMEND for plaintiff to allege her standing. The
demurrer is OVERRULED in all other respects.
Quiet Title. “ ‘An element of a cause of action for quiet
title is “[t]he adverse claims to the title of the plaintiff against which a
determination is sought.” (Code Civ.
Proc., § 761.020, subd. (c).)’ (West,
supra, 214 Cal.App.4th at p. 802.)”
(Orcilla v. Big Sur, Inc. (2016) 244 Cal.App.4th 982, parallel
citations omitted.) The demurrer is
SUSTAINED. As Cenlar asserts, it does
not claim an interest in the property as the servicer and thus ought not be
named in that cause of action. Because
Cenlar disclaims any such interest, the demurrer is, in this regard only,
SUSTAINED WITHOUT LEAVE TO AMEND.
Injunction. Cenlar contends that injunctive relief is not a cause of action. That is true. “Injunctive relief is a remedy, not a cause of action. (Art Movers, Inc. v. Ni West, Inc. (1992) 3 Cal.App.4th 640, 646.)” (City of South Pasadena v. Department of Transportation (1994) 29 Cal.App.4th 1280, 1293, parallel citations omitted.) The demurrer is SUSTAINED WITH LEAVE TO AMEND AS A REMEDY RATHER THAN AS A CAUSE OF ACTION. Plaintiff has leave to amend in the sense that plaintiff can restate the request in the prayer for relief or as the relief sought as part of another cause of action.
Unfair Competition. Cenlar first asserts that plaintiff has not
alleged a predicate violation of the UCL.
“ ‘Because Business and Professions Code section 17200 is written in the
disjunctive, it establishes three varieties of unfair competition—acts or
practices which are unlawful, or unfair, or fraudulent. “In other words, a practice is prohibited as
‘unfair’ or ‘deceptive’ even if not ‘unlawful’ and vice versa.” ’ [Citations.]”
(Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co.
(1999) 20 Cal.4th 163, 180.)
Plaintiff has pled a
fraudulent business practice. Under the
UCL, any fraudulent business practice is one that is “likely to deceive”
members of the public. (Kasky v.
Nike, Inc. (2002) 27 Cal.4th 939, 951; Bank of the West v. Superior
Court (1992) 2 Cal.4th 1254, 1267.)
“ ‘Likely to deceive’ implies more than a mere possibility that the
advertisement might conceivably be misunderstood by some few consumers viewing
it in an unreasonable manner. Rather,
the phrase indicates that the ad is such that it is probable that a significant
portion of the general consuming public or of targeted consumers, acting
reasonably in the circumstances, could be misled.” (Lavie v. Procter & Gamble Co.
(2003) 105 Cal.App.4th 496, 508.)
Further, “[t]o establish an unfair competition claim under the
fraudulent prong, plaintiffs must show that these representations were false or
were likely to have misled ‘reasonable consumers.’ (South Bay Chevrolet v. General Motors
Acceptance Corp. (1999) 72 Cal.App.4th 861, 878.)” (Belton v. Comcast Cable Holdings, LLC
(2007) 151 Cal.App.4th 1224, 1241, parallel citations omitted.)
Plaintiff essentially
alleges that the manner in which Cenlar pursued dual tracking was
deceptive. The court agrees. While the HBOR does not apply to this lien
directly, Cenlar’s actions as alleged violated the spirit of the law through
deceptive representations, which could be enough for a claim of
“unfairness.” “Defendant CENLAR’s
dual-tracking of Plaintiff’s loan modification constituted an unlawful, unfair
and fraudulent bidding practice. While
the Homeowner’s Bill of Rights (which explicitly bars dual-tracking) may only
apply to first liens, it was the manner in which Defendant CENLAR carried out
its dually-tracked foreclosure on Plaintiff’s property that was particularly
egregious. While Plaintiff diligently
pursued a loan modification at Defendant CENLAR’s continued insistence,
Defendant CENLAR repeatedly frustrated the process by sending critical notices
to out of date and nonexistent addresses, repeatedly demanding from Plaintiff
documents already provided, falsely assuring Plaintiff her modification had
been accepted, refusing loan payments from Plaintiff and providing Plaintiff
sham deadline dates for modification despite an imminent foreclosure.” (Compl., ¶75.) That is enough for the pleading stage.
As for standing under the
UCL, the court’s analysis follows what has previously been stated. Plaintiff has leave to amend to allege her
interest in the property, which should be sufficient for purposes of standing
under the UCL if properly pled. The demurrer is SUSTAINED WITH LEAVE TO AMEND
for this reason and in all other respects OVERRULED.
Plaintiff has 30 days’
leave to amend as indicated.