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.