Judge: Melvin D. Sandvig, Case: 22CHCV00478, Date: 2023-03-02 Tentative Ruling
Case Number: 22CHCV00478 Hearing Date: March 2, 2023 Dept: F47
Dept. F47
Date: 3/2/23
Case #22CHCV00478
DEMURRER TO THE
FIRST AMENDED COMPLAINT
Demurrer filed on 12/27/22.
RESPONDING PARTY: Plaintiffs Joanne Gallon and Gary Gallon
NOTICE: ok
Demurrer is to the entire First Amended Complaint:
1. Violation of
Civil Code 2923.5
2.
Violation of Civil Code 2923.6(c)
3.
Violation of Civil Code 2923.7
4.
Violation of Civil Code 2924.9
5.
Violation of Civil Code 2924.10
6.
Unfair Business Practices – Violation of Business & Professions Code
17200, et seq.
7.
Cancellation of Written Instruments – Civil Code 3412
RULING: The demurrer is sustained without leave to
amend.
FACTUAL SUMMARY & PROCEDURAL HISTORY
This action arises out of Plaintiffs Joanne Gallo and
Gary Gallo’s (Plaintiffs) claims of substandard loan modification review and
nonjudicial foreclosure proceedings relating to Plaintiffs’ real property
located at 13713 Bracken Street, Arleta, California.
On 6/29/22, Plaintiffs filed this action for: (1) Violation of Civil Code 2923.5; (2) Violation
of Civil Code 2924(a)(1); (3) Violation of Civil Code 2923.6(c); (4) Violation
of Civil Code 2923.7; (5) Violation of Civil Code 2924.9; (6) Violation of
Civil Code 2924.10; (7) Unfair Business Practices – Violation of Business &
Professions Code 17200, et seq.; and
(8) Cancellation of Written Instruments – Civil Code 3412
against Defendants Nationstar Mortgage LLC d/b/a Mr. Cooper (Mr. Cooper) and
U.S. Bank National Association as Trustee for Merrill Lynch Mortgage Investors
Trust, Mortgage Loan Asset-Backed Certificates, Series 2007-HE1 (U.S. Bank)
(collectively, Defendants).
After Plaintiffs’ counsel failed to respond to
Defendants’ counsel’s meet and confer efforts, on 9/2/22, Defendants filed a demurrer
to the entire complaint. On 11/3/22,
this Court sustained the demurrer to the entire complaint with leave to
amend. (See 11/3/22 Minute
Order). On 12/2/22, Plaintiffs filed the
subject First Amended Complaint alleging causes of action for: (1) Violation of
Civil Code 2923.5; (2) Violation of Civil Code 2923.6(c); (3) Civil Code
2923.6(c); (3) Violation of Civil Code 2923.7; (4) Violation of Civil Code
2924.9; (5) Violation of Civil Code 2924.10; (6) Unfair Business Practices –
Violation of Business & Professions Code 17200, et seq. and (7)
Cancellation of Written Instruments – Civil Code 3412. Although Plaintiffs allege seven causes of
action in their First Amended Complaint, the causes of action are referred to
as the 1st, 3rd, 4th, 5th, 6th,
7th and 8th, and will be referred to as such in this
ruling.
After Plaintiffs’ counsel failed to substantively respond
to Defendants’ counsel’s meet and confer efforts, on 12/27/22, Defendants filed
and served the instant demurrer to the entire First Amended Complaint. Plaintiffs have opposed the demurrer and
Defendants have filed a reply to the opposition.
ANALYSIS
Defendants’ Request for Judicial Notice (RJN) is granted.
1ST CAUSE OF ACTION – VIOLATION OF CIVIL
CODE 2923.5
Plaintiffs allege that Defendants violated Civil Code
2923.5(a)(2) because they did not contact Plaintiffs before recording the
notice of default on 2/11/20. (See
FAC ¶¶24-27). Plaintiffs also allege
that after the Notice of Default was recorded, they submitted a loss mitigation
application on 4/2/22 and were advised by Mr. Cooper on 4/8/22 “that they will
be sending them TPP [trial payment plan] however based on the delinquency
amount and the estimated appraisal, PLAINTIFFS have no equity… .” (FAC ¶¶16-17).
As noted in the ruling on the demurrer to the original
complaint, the only remedy available to Plaintiffs for such a violation is a
postponement of an impending foreclosure to permit the lender to comply with
Civil Code 2923.5. See Mabry
(2010) 185 CA4th 208, 214. Since
Plaintiffs concede that there is no pending sale date, there is nothing to
postpone. (See FAC ¶15).
Additionally, Plaintiffs’ own allegations establish that
they have engaged in loss mitigation options as required. See Mabry, supra. Further, in order to be actionable, a
violation of Civil Code 2923.5 must be material (i.e., plaintiffs must allege
they suffered prejudice as a result of the defendant’s failure to provide the
requisite notice) to be actionable. See
Smith 2018 WL 6431406, at *4; Hart 2015 WL 8374926, at *1. Plaintiffs allegations show that they have
not suffered prejudice as a result of the alleged violation of Civil Code
2923.5 because the allegations confirm that Plaintiffs communicated with
Defendants regarding loss mitigation options (i.e., Plaintiffs submitted a loan
modification application after the Notice of Default was recorded, were offered
a TPP and engaged in further discussions regarding same). (See FAC ¶¶16-20).
Based on the foregoing, Plaintiffs have failed to allege
sufficient facts to state a claim for violation of Civil Code 2923.5 and
further have no remedy since no sale date is pending.
3RD CAUSE OF ACTION – VIOLATION OF CIVIL
CODE 2923.6(c)
Plaintiffs allege that Defendants “violated Civ.Code §
2923.6(c) by failing to rescind all foreclosure efforts against PLAINTIFFS,
including the recording of a Notice of Default or Notice of Trustee’s Sale.” (FAC ¶37).
Civil Code 2923.6(c) prohibits a lender or trustee from advancing a
non-judicial foreclosure (i.e., recording a notice of default or notice of sale
or conducting a trustee’s sale) after a complete first lien loss mitigation
application has been submitted and during the time that it is pending. The statute does not require the rescission
of foreclosure-related documents recorded before a borrower submits a complete
loan modification application. Plaintiffs
allegations show that they submitted their loan modification application on
4/2/22, after the Notice of Default was recorded on 2/11/20. (FAC ¶¶33-34, Ex.E).
Plaintiffs now claim that they never received “a written
denial outlining the reasons for denial in order to allow PLAINTIFF to
appeal[;]” were “only offered a verbal denial to constructively prohibiting
[sic] plaintiff from appealing, as they have nothing in writing to direct their
appeal[;]” and that the “foreclosure continues to be forthcoming even though
plaintiff [sic] has not been offered an opportunity to appeal any denial.” (FAC ¶¶38-40).
These new allegations contradict prior allegations in the First Amended
Complaint where Plaintiffs allege that Mr. Cooper approved them for a loan
modification and sent them a TPP. (FAC ¶¶17-19).
Plaintiffs have still failed to allege facts to support a
finding that Defendants violated Civil Code 2923.6. As such, the cause of action fails to state a
claim. CCP 430.10(e).
4TH CAUSE OF ACTION – VIOLATION OF CIVIL
CODE 2923.7
When a borrower requests a loss prevention alternative,
the mortgage servicer must promptly establish a single point of contact to
communicate with the borrower regarding the application process, their
application, and deadlines for any required submissions; coordinate receipt of
documents; notify the borrowers of missing documents; provide current
information relating to the status of the application; ensure that the borrower
is considered for loss mitigation options (if available); and ensure access to
a person who can stop the foreclosure process if needed. See Civil Code 2923.7.
Plaintiffs allege that Defendants violated Civil Code
2923.7 because they failed to assign a “SPOC” (single point of contact) within
a reasonable time after receipt of Plaintiffs’ loan modification
application. (FAC ¶45). However, Plaintiffs’ allegations establish
that Plaintiffs submitted their loan modification application on 4/2/22, were
advised on 4/8/22 that they were being sent a “TPP” (trial payment plan) and
received specific information and updates regarding their application on
4/8/22, 4/27/22 and 5/19/22. (FAC
¶¶16-19). Plaintiffs further allege that
the purported failure to assign a single point of contact prevented them from
successfully submitting a complete application.
(FAC ¶¶45-46, 49). However, such
claim is contradicted by Plaintiffs’ allegation that they “submitted a Complete
Loan Modification Application” and within a week were approved for a TPP (trial
payment plan). (FAC ¶¶16-17).
Plaintiffs have amended their complaint to allege that
the failure to appoint a SPOC caused them not to be provided with details
regarding the denial which they allege has yet to be produced. (See FAC ¶¶47-48). Such allegations are confusing, at best,
considering Plaintiffs have previously alleged that they were approved for a
trial payment plan, meaning their request for a loan modification was not
denied. (See FAC ¶¶17-19).
Further, to state a claim under Civil Code 2923.7, the
alleged violation must be material. Civil
Code 2924.12. Plaintiffs have still failed
to allege facts to show the 5-day delay from the submission of their loan
modification application to Defendants’ notification that they would be sending
Plaintiffs a TPP materially affected their application.
Based on the foregoing, Plaintiffs have, again, failed to
allege sufficient facts to state the cause of action. CCP 430.10(e).
5TH CAUSE OF ACTION – VIOLATION OF CIVIL
CODE 2924.9
Civil Code 2924.9
provides, in relevant part, that that within five business days after
recording a notice of default pursuant to Civil Code 2924, a mortgage servicer
shall send a written communication to the borrower that includes all of the
following information: (1) That the borrower may be evaluated for a foreclosure
alternative prevention alternative or, if applicable foreclosure prevention
alternatives, (2) Whether an application is required to be submitted by the
borrower in order to be considered for a foreclosure prevention alternative,
and (3) The means and process by which a borrower may obtain an application for
a foreclosure prevention alternative. See
Civil Code 2924.9(a).
Plaintiffs contend that Defendants “failed to notify
PLAINTIFFS of all foreclosure prevention alternatives within 5 business days
after Notice of Default recorded as required by Civ Code §2924.9.” (FAC ¶53).
However, as with the foregoing claims, a violation of Civil Code 2924.9
is only actionable if it is material. See
Civil Code 2924.12. Plaintiffs have,
again, failed to allege facts to show how Defendants’ alleged violation of
Civil Code 2924.9 was material, especially since Defendants subsequently
considered Plaintiffs’ loan modification application and granted Plaintiffs a
TPP. (FAC ¶¶16-17); See Richardson
2016 WL 10078486, at *5.
6TH CAUSE OF ACTION – VIOLATION OF CIVIL
CODE 2924.10
Plaintiffs claim that Defendants violated Civil Code
2924.10 by failing to send them written acknowledgement of receipt of
Plaintiffs’ loan modification application within five days of receipt of
same. (FAC ¶¶57-59). However, Plaintiffs concede that on 4/8/22
(after the submission of their loan modification application on 4/2/22)
Defendants notified them that they would be sending them a TPP. (FAC ¶¶16-17). Plaintiffs have still failed to allege
sufficient facts to show how a “written acknowledgement” would have changed the
course of the modification process, in other words how the alleged violation
was material, which is required to state a claim. See Civil Code 2924.12; Richardson, supra at *6.
7TH CAUSE OF ACTION- UNFAIR BUSINESS
PRACTICES – VIOLATION OF BUSINESS & PROFESSIONS CODE 17200, ET SEQ.
Business & Professions Code 17200, et seq. provides a
private cause of action for unlawful, unfair and/or fraudulent business acts or
practices. Cel-Tech Communications,
Inc. (1999) 20 C4th 163, 180.
Plaintiffs have failed to establish that they have
standing to make such a claim because they have not alleged sufficient fact to
show that they suffered an injury in fact which was caused by an act or
omission of Defendants. See
Business & Professions Code 17204; Kwikset Corp. (2011) 51 C4th 310,
322. Plaintiffs’ allegations show that their
loan modification application was timely reviewed. (FAC ¶¶16-17). Additionally, any losses suffered by
Plaintiff were seemingly the result of their default on their loan and/or trial
payment plan, not any conduct by Defendants.
(See FAC ¶20; RJN Ex.3, 5, 6).
Plaintiffs have failed to allege sufficient facts to
support a finding of unlawful, unfair and/or fraudulent business practices as
defined by the unfair competition law. See
Business & Professions Code 17200.
As noted in relation to the other causes of action,
Plaintiffs have not alleged facts to show that any conduct of Defendants was
unlawful. See Cel-Tech, supra
at 180.
To state a claim under the unfair prong, Plaintiffs must
allege facts showing: (1) their injury is substantial; (2) their injury is not
outweighed by any countervailing benefits to consumers or competition; and (3)
the injury is one that Plaintiffs themselves could not have reasonably
avoided. Davis (2009) 179 CA4th
581, 597-598. Plaintiffs have failed to
identify any business practice of either Defendant that is unfair. Instead, Plaintiffs define “unfair” business
practices and claim that “Defendant’s failure to properly assist Plaintiff and
then to [sic] failing to provide any explanation created a misleading set of
events and procedures practiced by Defendant on Plaintiff… .” (FAC ¶¶ 72, 74-75). Such conclusory and confusing allegations are
insufficient to support Plaintiffs’ unfair
business practices cause of action.
Additionally, the injury Plaintiffs claim (the alleged
time spent repeatedly submitting updated financial documents) is contradicted
by Plaintiffs’ other allegations. (See
generally, FAC and ¶78). Specifically,
Plaintiffs’ request for a loan modification was approved in less than a week.
(FAC ¶¶16-17). Also, Plaintiffs have not
alleged facts to show that any action they undertook against Defendants was due
to wrongdoing by Defendants. Plaintiffs
have failed to allege facts to support a finding that their claimed injury
outweighs Defendants’ interests in being able to collect on the debt owed. See Camacho (2006) 142 CA4th
1394, 1406. Further, Plaintiffs could
have reasonably avoided the claimed injury by not defaulting on their loan and/or
accepting the TPP. (See FAC ¶20;
RJN Ex.3, 5, 6).
Plaintiffs have also failed to allege facts to support a
finding of fraudulent/deceptive conduct on the part of Defendants to support a
claim under the fraudulent prong.
8TH CAUSE OF ACTION – CANCELLATION OF
WRITTEN INSTRUMENTS – CIVIL CODE 3412
In this cause of action, Plaintiffs seek to cancel the
Notice of Default and Notice of Trustee’s Sale because of Defendants’ purported
violations of Civil Code 2923.5, 2923.6(c), 2923.7, 2924.9 and 2924.10. (FAC ¶¶82-84). As noted above, Plaintiffs have failed to
allege sufficient facts to establish a violation of any of the foregoing
statutes. As such, Plaintiffs have also
failed to allege sufficient facts to state this cause of action.
CONCLUSION
Plaintiffs have now had two opportunities to plead their
claims against Defendants and have failed to adequately do so. Additionally, in their opposition, Plaintiffs
failed to address the arguments made in the demurrer and failed to indicate how
they can further amend their complaint to cure the defects noted above. See Goodman (1976) 18 C3d 335,
349 (plaintiffs have burden to show the manner in which their causes of action
can be amended and how the amendments will change the legal effect of the
pleading). Based on the foregoing, the
demurrer is sustained without leave to amend.