Judge: Mark H. Epstein, Case: 22SMCV02460, Date: 2023-03-09 Tentative Ruling
Case Number: 22SMCV02460 Hearing Date: March 9, 2023 Dept: R
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 a property for $545,000 with two deeds of trust
to 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 it. (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 allegedly 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 promise 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, which is when plaintiff believed she was still working on
refinancing the property with CITI. (Id.
at ¶20.) Plaintiff claims she became
aware of the notice 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 Cenlar only updated the city, not the street
address. (Ibid.) Plaintiff claims the issue was not resolved
until April 2020. (Ibid.) Plaintiff claims that she submitted repayment
plans to Cenlar on three different occasions between May to July 2020, but
Cenlar continued to refuse payment while also sending her letters encouraging
her to apply for loan modification. (Id.
at ¶¶24-25.) In September 2020, Cenlar
purportedly cut plaintiff’s access to the portal, 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 allegedly received
yet another letter indicating her loan modification was complete, but then got
a follow-up request for 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 apparently gave a
deadline of May 29 to submit certain documents.
(Ibid.) However, on May 24, Cenlar foreclosed. (Id. at ¶32.)
Defendant Ostayan acquired
the property through the foreclosure sale allegedly by 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’s affidavit was false to the extent that it stated that he would
move into the property within 60 days and would occupy it as his primary
residence for at least a year; plaintiff contends that this was Ostayan’s
thirteenth property he had purchased at a foreclosure sale within the past year
by claiming he was an eligible bidder. (Id.
at ¶¶40-41.) This is important because
such a declaration forestalls what would otherwise be a waiting period during
which a person who would be an owner occupant (including plaintiff) could
submit a higher bid to the trustee and obtain the property.
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 Ostayan’s
demurrer. There is no opposition that
the court can find in the record.
However, that does not automatically mean the court will sustain the
demurrer.
Ostayan requests judicial
notice of five recorded documents regarding the property and the related UD
action. The request is GRANTED in
full. (See Evid. Code, § 452, subds. (b)-(d).) The court notes that it does not take
judicial notice of the truth of the matters stated therein but does take
judicial notice of the documents’ jural effect.
The court notes that this
is not the first demurrer in this action.
The court previously sustained Cenlar’s demurrer in part. (2/28/23 MO.)
Some discussions here are therefore abbreviated because the court
already discussed the matters at length in the ruling on Cenlar’s
demurrer. With that, the court turns to
the merits.
Standing. Ostayan demurs to the
third through sixth causes of action on the grounds of failure to state
sufficient facts. (See Code Civ. Proc.,
§ 430.10, subd. (e).) The first (and
perhaps main) argument raised by Ostayan is that plaintiff lacks standing because
she affirmatively alleges that she is not the owner of the property individually,
but as trustee. The court reiterates what was previously stated in the Cenlar
demurrer. Plaintiff needs to address
that issue, but it is an issue that the court believes can be addressed
readily. The demurrer is SUSTAINED with
leave to amend so that plaintiff can either allege why she has standing in her
individual capacity or to bring suit in her capacity as trustee (or both).
Intentional Interference
with Prospective Economic Relations. Ostayan next
demurs to the third cause of action for intentional interference with
prospective economic relations. There,
plaintiff alleges she “had an economic relationship with CENLAR by virtue of
the HELOC loan.” (Compl., ¶56.) Ostayan claims plaintiff has not alleged all
of the tort’s necessary elements. The
elements for a claim for intentional interference with prospective economic
advantage are: “ ‘ “(1) an economic relationship between the plaintiff and some
third party, with the probability of future economic benefit to the plaintiff;
(2) the defendant's knowledge of the relationship; (3) intentional acts on the
part of the defendant designed to disrupt the relationship; (4) actual
disruption of the relationship; and (5) economic harm to the plaintiff
proximately caused by the acts of the defendant.” [Citations.]’ (Westside
Center Associates v. Safeway Stores 23, Inc. (1996) 42 Cal.App.4th 507,
521–522.)” (Korea Supply Co. v.
Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1153.) “The case law recognizes that ‘the
interference tort applies to interference with existing noncontractual
relations which hold the promise of future economic advantage.’ (Westside Center, supra, 42
Cal.App.4th at p. 524, citing Blank, supra, 39 Cal.3d 311, and Youst,
supra, 43 Cal.3d 64.) The tort's
requirements ‘presuppose the relationship existed at the time of the
defendant's allegedly tortious acts lest liability be imposed for actually and
intentionally disrupting a relationship which has yet to arise.’ (Westside Center, at p. 526, italics
added.)” (Roy Allan Slurry Seal, Inc.
v. American Asphalt South, Inc. (2017) 2 Cal.5th 505, 517–518, emphasis by Roy
Allan Court.)
Ostayan raises many
arguments, but the court need only address one: plaintiff has not alleged any
economically advantageous relationship between herself and Cenlar that Ostayan
disrupted. First, her relationship with
Cenlar was in the context of an existing loan transaction. The purpose of this tort is for commercial
relationships. “The tort of intentional
interference with prospective economic advantage is not intended to punish
individuals or commercial entities for their choice of commercial relationships
or their pursuit of commercial objectives, unless their interference amounts to
independently actionable conduct. (Marin
Tug & Barge, Inc. v. Westport Petroleum, Inc. (9th Cir.2001) 271 F.3d
825, 832.)” (Korea Supply, supra,
29 Cal.4th at pp. 1158–1159.) “The tort
has traditionally protected the expectancies involved in ordinary commercial
dealings—not the ‘expectancies,’ whatever they may be, involved in the
governmental licensing process. (See
Prosser & Keeton, The Law of Torts (5th ed. 1984) § 130, p. 1006.) ” (Blank v. Kirwan (1985) 39 Cal.3d 311,
330, parallel citations omitted.)
Further, although Ostayan was the successful bidder, there is no allegation
that he caused the alleged disruption.
That disruption occurred before Ostayan became involved and would have
existed whomever the buyer was.
Relatedly, there is no reason to believe Ostayan was even aware of the
relationship or state of affairs between plaintiff and Cenlar.
And Cenlar was the loan
servicer. That is not a commercial
relationship protected by the tort. “ ‘A
loan transaction contemplates a debtor-creditor relationship with an obligation
of the “debtor” to repay the amount of the loan to the creditor . . . .’ (4
Miller & Starr, supra, § 10:3, p 651.)”
(Ghirardo v. Antonioli (1994) 8 Cal.4th 791, 802.) And the relationship with Cenlar was to
service the loan plaintiff owed.
Plaintiff was not receiving some economic advantage as envisioned by the
interference cause of action.
Because the court has
found no authority indicating this sort of tort is viable in the loan context
or allegation in the complaint that the prospective economic relationship with
Cenlar comes within the tort or that Ostayan interfered with (or even knew of)
the relationship, the demurrer is SUSTAINED.
Leave to amend is granted although plaintiff should consider whether she
can really plead around this issue.
Quiet Title. The demurrer is
SUSTAINED WITH LEAVE TO AMEND to the fourth cause of action for quiet
title. A complaint for quiet title is
required to include, among other things, “[a] description of the property that
is the subject of the action. In the
case of tangible personal property, the description shall include its usual
location. In the case of real property,
the description shall include both its legal description and its street address
or common designation, if any.” (Code
Civ. Proc., § 761.020, subd. (a).)
Plaintiff’s legal description in paragraph 2 of her complaint is
incomplete when compared to the recorded documents’ description of the
property. (See, e.g., RJN, Exh. 1.) Plaintiff also fails to allege the effective
date of determination for her claim.
(Code Civ. Proc., § 761.020, subd. (d) [“The date as of which the
determination is sought. If the determination is sought as of a date other than
the date the complaint is filed, the complaint shall include a statement of the
reasons why a determination as of that date is sought”].) However, while the demurrer is sustained on
this ground, it is easily cured.
Ostayan further asserts
that plaintiff has not properly alleged tender.
“A borrower may not, however, quiet title against a secured lender
without first paying the outstanding debt on which the mortgage or deed of
trust is based. (Miller v. Provost
(1994) 26 Cal.App.4th 1703, 1707 [‘mortgagor of real property cannot, without
paying his debt, quiet his title against the mortgagee’]; Aguilar v. Bocci (1974) 39 Cal.App.3d
475, 477 [borrower cannot quiet title without discharging the debt].) The cloud on title remains until the debt is
paid. (Burns v. Hiatt (1906) 149
Cal. 617, 620–622.)” (Lueras v. BAC
Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 86, parallel citations
omitted.) Ostayan goes a step further
and contends plaintiff cannot be excused from the tender requirement. He asserts that the tender exception under
the HBOR is not triggered here because the loan at issue is not a first
lien. Ostayan is correct that the HBOR
only applies to first liens. (See Civ.
Code, § 2923.6, subd. (c).) However, Ostayan
cites no authority stating that the excuse or exception can derive from no
other place. Instead, case law has developed
exceptions outside of the HBOR. “There are, however, exceptions to the tender
requirement. Our review of the case law
discloses four exceptions.” (Lona v.
Citibank, N.A. (2011) 202 Cal.App.4th 89, 112.) The Lona court’s discussion of each
exception includes citations to various cases establishing or illustrating the
existence of the tender exception. Thus,
this argument by Ostayan is not fully substantiated. In any event, as with regard to the Cenlar
demurrer, the court believes finding that there can be no exception to the
tender requirement as a matter of law at the pleading stage would be unjust and
improper. This matter can be better addressed by way of another motion with the
required authority, analysis, and evidence going to the specific facts and
circumstances of this case. The court
also notes that that the rule bars plaintiff from quieting title as against a
secured lender without tender. Ostayan
is not a secured lender.
Ostayan next asserts that
plaintiff has not named all the indispensable parties because she admits the
first deed of trust still secures that property. This is an argument on defect of
parties. As summarized by the Rutter
Guide, a demurrer on that ground is well-taken only where: (1) some third party
is necessary and/or indispensable to the action and must be joined for the
action to proceed (defect of parties); or (2) the plaintiffs lack sufficient
unity of interest or there is no common question of law or fact as to the
defendants (misjoinder of parties). (Edmon & Karnow, Cal. Practice Guide:
Civil Procedure Before Trial (The Rutter Group 2022) ¶¶7:80-81.) Ostayan argues that CITI must be joined. The
court agrees that normally “[T]he ‘failure to join “indispensable” parties does
not deprive a court of the power to make a legally binding adjudication between
the parties properly before it.’ (Weir
v. Ferreira (1997) 59 Cal.App.4th 1509, 1519.) To be sure, ‘ “[a]n indispensable party is
not bound by a judgment in an action in which he was not joined.” ’ (Save our Bay, Inc. v. San Diego Unified
Port Dist. (1996) 42 Cal.App.4th 686, 693.)
But failing to join an indispensable party ‘ “ ‘is not ‘a jurisdictional
defect’ in the fundamental sense.’ ” ’ (Tracy Press, supra, 164
Cal.App.4th at pp. 1298–1299; see Kraus v. Willow Park Public Golf Course
(1977) 73 Cal.App.3d 354, 364.)” (Doe
v. Regents of University of California (2022) 80 Cal.App.5th 282, 305,
parallel citations omitted.) But the
situation is a bit different here and plaintiff’s complaint is a little confusing
on this. In the quiet title claim, she
alleges, “A judicial determination of these issues and of the respective duties
of Plaintiff and Defendants is necessary and appropriate at this time under the
circumstances as Defendants have wrongfully taken title to the Property to the
detriment of Plaintiff.” (Compl., ¶66.)
In her prayer for relief, though, plaintiff alleges she seeks a “judicial
declaration that Plaintiff is the sole owner of the Subject Property not subject
to any encumbrance[.]” Plaintiff needs
to be clear on whether she only seeks a determination as to Ostayan’s claimed
adverse interest, or whether seeks title free and clear of all encumbrances,
including CITI’s first lien. For
purposes of a quiet title action, plaintiff ought to join all those whose
interests are or might be affected by a judgment quieting title. The demurrer is SUSTAINED, but leave to amend
is appropriate to allow the defect to be cured.
Injunctive Relief. The demurrer is
SUSTAINED WITHOUT LEAVE TO AMEND.
Injunction is not a cause of action.
However, plaintiff can restate the request for injunctive relief in her
prayer for relief.
UCL. The demurrer to the UCL
claim is SUSTAINED, but only on the general standing issue (whether plaintiff
must sue in her capacity as a trustee).
The standing argument specific to the UCL is not persuasive. Plaintiff (in some capacity) has standing
under the UCL even as it applies to Ostayan.
To satisfy the standing requirements under the UCL, a party must “(1)
establish a loss or deprivation of money or property sufficient to qualify as
injury in fact, i.e., economic injury, and (2) show that that economic
injury was the result of, i.e., caused by, the unfair business practice
or false advertising that is the gravamen of the claim.” (Kwikset Corp. v. Superior Court
(2011) 51 Cal.4th 310, 322, emphasis in original.) “There are innumerable ways in which economic
injury from unfair competition may be shown.
A plaintiff may (1) surrender in a transaction more, or acquire in a
transaction less, than he or she otherwise would have; (2) have a present or
future property interest diminished; (3) be deprived of money or property to
which he or she has a cognizable claim; or (4) be required to enter into a
transaction, costing money or property, that would otherwise have been
unnecessary. (See, e.g., Hall v. Time
Inc., supra, 158 Cal.App.4th at pp. 854–855 [cataloguing some of the
various forms of economic injury].)” (Id.
at p. 323, parallel citations omitted.)
But there are limits. As the Court of Appeal held in Jenkins v.
JPMorgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, “However, Jenkins's
third cause of action must also satisfy the second prong of the standing
requirements under Business and Professions Code section 17204 (i.e., causation),
which required her to plead a causal link between her economic injury, the
impending nonjudicial foreclosure of her home, and the six unfair or unlawful
acts allegedly committed by Defendants.
(Bus. & Prof. Code, § 17204.)
Importantly, Jenkins admits in both her SAC and opening brief that she
defaulted on her loan. It is also
indisputable Jenkins's default triggered the lawful enforcement of the power of
sale clause in the deed of trust, and it was the triggering of the power of
sale clause that subjected Jenkins's home to nonjudicial foreclosure. Moreover, Jenkins's SAC and opening brief
acknowledge her default occurred prior to the six unlawful or unfair acts she
alleges as the basis of her UCL action.
As Jenkins's home was subject to nonjudicial foreclosure because of
Jenkins's default on her loan, which occurred before Defendants' alleged
wrongful acts, Jenkins cannot assert the impending foreclosure of her home
(i.e., her alleged economic injury) was caused by Defendants' wrongful actions. Thus, even if we assume Jenkins's third cause
of action alleges facts indicating Defendants' actions violated at least one of
the UCL's three unfair competition prongs (unlawful, unfair, or fraudulent),
Jenkins's SAC cannot show any of the alleged violations have a causal link to
her economic injury. In light of these
facts, we conclude the demurrer to Jenkins's third cause of action was
proper.” (Id., at pp. 522–523,
disapproved of on another ground by Yvanova v. New Century Mortgage Corp.
(2016) 62 Cal.4th 919.)
Here, plaintiff does not
allege she defaulted on a loan because of Ostayan. The foreclosure was not caused due to
Ostayan’s allegedly wrongful acts.
Instead, he is only the successful bidder at the foreclosure sale and
the sale is what caused plaintiff’s harm.
Or at least part of her harm. The
point of SB-1079 is to permit another potential buyer who would be an
owner-occupier (which could be plaintiff or a third party) to outbid the buyer
at the trustee’s sale and obtain the property.
Here, there was equity in the property, meaning that a higher bid would
have resulted in a greater surplus for plaintiff. That is financial standing—plaintiff received
less by virtue of the trustee’s sale than she otherwise might have received and
but for Ostayan’s alleged misconduct and Ostayan got the benefit thereof. That is sufficient for standing.
Motion to Strike. Ostayan’s motion to strike plaintiff’s
request for attorney’s fees is DENIED.
It is premature to decide this issue.
It can be decided on a motion for attorneys’ fees, should plaintiff ever
file one.