Judge: Melvin D. Sandvig, Case: 22CHCV00968, Date: 2023-03-28 Tentative Ruling
Case Number: 22CHCV00968 Hearing Date: March 28, 2023 Dept: F47
Dept. F47
Date: 3/28/23
Case #22CHCV00968
DEMURRER TO THE
ORIGINAL COMPLAINT
Demurrer filed on 2/6/23.
MOVING PARTY: Defendant Fay Servicing LLC
RESPONDING PARTY: Plaintiff Maria Rosales
NOTICE: ok
Demurrer is to the entire complaint:
1. Violation of
Civil Code 2923.6
2.
Violation of Civil Code 2923.7
3.
Violation of Civil Code (a-d)
4.
Violation of Business & Professions Code 17200, et seq.
RULING: The demurrer is sustained with 30 days
leave to amend.
SUMMARY OF FACTS & PROCEDURAL HISTORY
The action arises out of foreclosure proceedings against
Plaintiff Maria Rosales’ property (Plaintiff).
On 5/18/07, Plaintiff obtained a mortgage loan from First
Magnus Financial Corporation in the amount of $707,200.00 (Loan) secured by a Deed
of Trust (DOT) recorded on the subject property located at 19125 Olympia
Street, Los Angeles, California 91326 (Property). (See RJN, Ex.1). On 6/10/09, an Assignment of the Deed of
Trust was recorded evidencing the prior transfer of the Loan to PNMAC Mortgage
Opportunity Fund Investors, LLC (PNMAC).
(RJN, Ex.2). Plaintiff had
previously defaulted on the Loan, but obtained a loan modification with PNMAC
in 2009. (Complaint ¶11). On 10/16/17, an Assignment of the Deed of
Trust was recorded evidencing the transfer of the Loan from PNMAC to Wilmington
Trust, National Association, as Trustee of MFRA Trust 2014-2 (Wilmington). (RJN, Ex.3).
On 1/23/19, a Substitution of Trustee was recorded
whereby Wilmington substituted in Barrett Daffin Frappier Treder & Weiss,
LLP (BDFTW) as the DOT Trustee. (RJN, Ex.4).
Plaintiff had defaulted again beginning
with the September 2018 payment, and as a result, BDFTW recorded a Notice of
Default on 1/25/19. (RJN, Ex.5). On 4/24/19, since the default remained uncured,
a Notice of Trustee’s Sale was recorded setting the sale for 5/31/19. (RJN, Ex.6).
On 5/29/19, Plaintiff filed a voluntary Chapter 13 bankruptcy petition which
delayed the sale. (RJN, Ex.7).
Wilmington obtained relief from stay by Order entered 10/21/19 and the petition
was dismissed on 2/4/20. (Id., docket
nos. 28 and 40). On 2/18/20, Plaintiff
filed another voluntary Chapter 13 bankruptcy petition. (RJN, Ex.8).
Again, Wilmington obtained relief from stay by an Order entered 11/30/20. (Id., docket no. 69).
Based on the relief order and the fact that Plaintiff had
not cured the default, on 1/12/21, a new Notice of Trustee’s Sale was recorded
setting the sale for 2/17/21. (RJN, Ex.9).
On 5/21/21, pursuant to the bankruptcy
trustee’s motion, Plaintiff’s second bankruptcy petition was dismissed and the
petition formally closed on 7/15/21. (RJN,
Ex.8, docket no.’s 73-74, 81). On 7/2/21,
prior to her second petition being
formally closed, Plaintiff filed a third voluntary Chapter 13 bankruptcy
petition. (RJN, Ex.10). On 11/23/21, while her third petition was
still pending, Plaintiff filed a lawsuit against Defendant Fay Servicing, LLC
(Defendant) and Wilmington asserting purported violations of the Homeowner Bill
of Rights (HBOR) – LASC Case No. 21STCV43116.
(RJN, Ex.11). That lawsuit
alleged that Plaintiff had submitted a loan modification application to Defendant
on 1/17/21 and attached a different application allegedly faxed to Defendant on
11/17/21. (RJN, Ex.11, ¶15 and Ex.F
thereto). All such applications were
denied. (Complaint ¶¶17-18). On 12/16/21, Plaintiff’s third bankruptcy
petition was dismissed. (RJN, Ex.12). Plaintiff’s prior lawsuit was dismissed
without prejudice on 1/11/22. (RJN, Ex.13).
Thereafter, Plaintiff purported to transfer an interest
in the Property to Manuel Vargas who then filed a bankruptcy petition on 1/10/22. (RJN, Ex.14; Complaint ¶13). As a result of Vargas’ bankruptcy filing,
Wilmington obtained an in-rem bankruptcy Relief Order on 3/17/22 attaching to the Property. (RJN, Ex.15).
In the Relief Order, the bankruptcy court noted that the filing of the
petition was “part of a scheme to hinder, delay, or defraud creditors.” Id. On 3/31/22, a new Notice of Trustee’s Sale
was recorded setting the foreclosure sale for 5/2/22. (RJN, Ex.16). That sale was postponed several times and Plaintiff
submitted another application for a modification in August 2022 which Plaintiff
admits was denied on 8/26/22. (Complaint
¶¶17-18).
On or around Friday, 10/21/22, Plaintiff alleges she
submitted another loan modification application wherein she claimed a material
change in her financial circumstances existed.
(Complaint ¶¶19-21; RJN, Ex.17).
The foreclosure sale took place on 10/28/22 and the Property reverted to
Wilmington. (RJN, Ex.18).
On Monday, 10/24/22, Plaintiff filed this action against
Defendant for: (1) Violation of Civil
Code 2923.6; (2) Violation of Civil Code 2923.7; (3) Violation of Civil Code
(a-d) and
(4) Violation of Business & Professions Code 17200,
et seq. After meet and confer efforts
failed to resolve the issues raised by this demurrer, on 2/6/23, Defendant
filed and served the instant demurrer to the entire complaint on the grounds
that each of the causes of action is uncertain and fail to state facts
sufficient to constitute a cause of action.
CCP 430.10(e), (f). Plaintiff has
opposed the demurrer and Defendant has filed a reply to the opposition.
ANALYSIS
Defendant’s Request for Judicial Notice (RJN) is
granted.
1ST CAUSE OF ACTION – VIOLATION OF CIVIL
CODE 2923.6
Civil Code 2923.6 provides, in relevant part:
“(c) If a borrower submits a
complete application for a first lien loan modification offered by, or through,
the borrower's mortgage servicer at least five business
days before a scheduled foreclosure sale, a mortgage servicer, mortgagee,
trustee, beneficiary, or authorized agent shall not record a notice of default
or notice of sale, or conduct a trustee's sale, while the complete first lien
loan modification application is pending. A mortgage servicer, mortgagee,
trustee, beneficiary, or authorized agent shall not record a notice of default
or notice of sale or conduct a trustee's sale until any of the following occurs.
. .
. .
.
(h) For purposes of this section,
an application shall be deemed ‘complete’ when a borrower has supplied the
mortgage servicer with all documents required by the mortgage servicer within
the reasonable timeframes specified by the mortgage servicer.
. .
.
(g) In order to minimize the risk
of borrowers submitting multiple applications for first lien loan modifications
for the purpose of delay, the mortgage servicer shall not be obligated to
evaluate applications from borrowers who have been evaluated or afforded a fair
opportunity to be evaluated consistent with the requirements of this section,
unless there has been a material change in the borrower's financial
circumstances since the date of the borrower's previous application and that
change is documented by the borrower and submitted to the mortgage servicer.”
Plaintiff bases the 1st cause of action on the
allegation that she submitted a “complete” application for loan modification
“[o]n or around October 21, 2022” which evidenced a material change in her
financial circumstances from her previously denied applications. (Complaint ¶¶19-21, 24-34). While Plaintiff’s complaint references the
October 21, 2022 application, Plaintiff does not attach the application to the
complaint. However, the Court may take
judicial notice of the truth of statements within a legally operative document
even if not attached to the complaint provided the fact is not reasonably
subject to dispute. Scott (2013)
214 CA4th 743, 754. Because Plaintiff’s
case is based on the October 21, 2022 application referenced in the complaint,
the application is a legally operative document whose authenticity cannot
reasonably be disputed by Plaintiff. Id.;
Evidence Code 452(h). Moreover,
Plaintiff does not object to Defendant’s request that the Court take judicial
notice of the application and, in fact, relies on the application in her
opposition to the demurrer. (See
Opposition, p.3:24-p.4:1; RJN, Ex.17).
The judicially noticed facts indicate that the 10/21/22 application was not
timely submitted by Plaintiff. The first
page of the application states that for “properties located in the state of
California, all documents required to complete a loss mitigation application
must be received at least five (5) business days before a scheduled foreclosure
sale” and “Documents received after 4:00 pm CST on any Business Day will be
deemed to have been received on the next Business Day.” (emphasis in
original) (RJN, Ex.17). The time stamp
at the top of the application indicates that the fax began 16:57 which is 4:57
p.m. on 10/21/22 and ended at 17:13 or 5:30 p.m. (regardless of whether the
time is for PST (where the document was faxed from or CST where it was
received), it is after the 4 pm CST deadline set forth in the application),
which was a Friday, and the foreclosure sale was scheduled for Friday,
10/28/22. (RJN, Ex.17, p.1 and p.18;
RJN, Ex.18). Since the application was
received after 4:00 pm CST on Friday, 10/21/22, it was deemed to have been
received on Monday, 10/24/22, which is less than 5 business days before the
sale and the same day this action was filed.
Plaintiff does not dispute that the application was received by
Defendant after 4 pm CST on 10/21/22 or that the application expressly states
that applications received after 4 pm CST will be deemed received the next
business day. Instead, Plaintiff argues,
without any authority, that Defendant cannot establish the hours of its
“business day” (i.e., that it ends at 4 pm CST) when the statute provides that
the complete application must be submitted “at least five business days before
a scheduled foreclosure sale.” (See
Opposition, p.4:11-18). Even if the
application was timely submitted, the judicially noticeable facts establish
that it was not complete.
As noted above, for the application to be “complete”
Plaintiff was required to provide Defendant with all documents required by
Defendant within the reasonable timeframes specified by Defendant. Civil Code 2923.6(h). Such documentation includes that which
evidences Plaintiff’s claimed material change in financial circumstances. See Civil Code 2923.6(g); Ivey
2016 U.S. Dist. LEXIS 115863, at *8-9; Winterbower 2013 U.S. Dist. LEXIS
44087, at *9; Ware 2013 U.S. Dist. LEXIS 163346, at *15. Here, Plaintiff faxed the application after
Defendant’s business hours on Friday, 10/22/22, without necessary supporting
documents, and filed this action the following Monday, 10/24/22. The missing documents include:
(1) Documents to support the non-borrower income from “co-owner,
Manuel Vargas and his son Ivan Vargas” in the amount of $4,600.00 per month
referenced in the application. Although
a couple of paystubs are included for Ivan Vargas, nothing is submitted for
Manuel Vargas, and no documentation was provided to evidence a $4,600.00
contribution, or even that these purported contributors had the necessary
income to contribute $4,600.00 per month;
(2) Documents that evidence the $4,400 per month in
“Rents Received” referenced in the application; and
(3) Bank statements to evidence any income and expenses.
(See Complaint ¶¶29-32; RJN, Ex.17).
2ND CAUSE OF ACTION – VIOLATION OF CIVIL
CODE 2923.7
Civil Code 2923.7(a) provides that “[w]hen a borrower requests
a foreclosure prevention alternative, the mortgage servicer shall promptly
establish a single point of contact and provide to the borrower one or more
direct means of communication with the single point of contact.”
Plaintiff alleges that “Defendant violated California
Civil Code §2923.7(b) by failing to provide Plaintiff with a single point of
contact who could carry out all of their statutory duties.” (Complaint ¶37).
As noted above, Plaintiff submitted the application,
which is the subject of this action, on Friday, 10/21/22, after Defendant’s
business hours, and filed this action on the following Monday, 10/24/22, the
same day the application indicates that it would be deemed received by Defendant. Even if the application was deemed received
late in the day on Friday, 10/21/22, it can hardly be said that Defendant
violated an obligation to “promptly establish a single point of contact” when
this action was filed the next business day, Monday, 10/24/22. In other words, Plaintiff did not provide
Defendant with a reasonable opportunity to establish a single point of contact
before alleging that Defendant failed to do so.
As such, any such single point of contact would not have had a
reasonable opportunity to notify Plaintiff of the missing documents necessary
to complete the application before this action was filed. See Civil Code 2923.7(b)(2).
Additionally, while Plaintiff claims that Defendant
should have communicated to her the need for explanation of the different
address on her income tax and other documentation and proof of rental income,
Plaintiff fails to indicate what additional allegations and/or documentation
she can make/provide to clarify her application and/or make it complete. (See Opposition, p.5:16-20). Plaintiff has the obligation to show the
manner in which she can amend and how the proposed amendment will change the
legal effect of the pleading. Blank
(1985) 39 C3d 311, 318; Palm Springs Tennis Club (1999) 73 CA4th 1, 8.
Further, as noted above, judicially noticed facts
indicate that Plaintiff does not reside at the Property as claimed. (RJN, Ex.17; Complaint ¶26); Hoffman, supra. Therefore, it does not appear that Plaintiff
qualifies for relief under Civil Code 2923.7.
See Civil Code 2924.15.
3RD CAUSE OF ACTION – VIOLATION OF CIVIL
CODE 2924(c-d)
Plaintiff alleges that
“Defendant violated Civil Codes §
2924(c-d) by purporting the unpaid balance of the unpaid obligation including
reasonable estimated costs, expenses, and advances totals as $1,217,420.35 in
the Notice of Trustee’s sale, which illegitimately included escrow balances
that charges for homeowners’ insurance when Plaintiff was independently
carrying their own policy with Farmers Insurance. Particularly, Plaintiff
contends that on April 18, 2022, Plaintiff was charged for insurance, when
Plaintiff already carried insurance with California Fair Plan Property
Insurance.”
(Complaint ¶46; See also
Complaint ¶¶43-45, 47).
The cause of action is uncertain because there is no
Civil Code 2924(c) or 2924(d). It
appears that Plaintiff is attempting to assert a claim under Civil Code 2924c
and 2924d which deal with amounts necessary to cure a default and reinstate a
loan after a monetary breach. Such a
claim does not appear to apply to the facts alleged in the complaint.
Civil Code 2924c allows the borrower to pay the amount in
default, plus specified fees and expenses, and thereby cure the default,
reinstate the mortgage loan, and avoid foreclosure. See Civil Code 2924(a)(1); Anderson
(1989) 208 CA3d 202, 212; Walker (2002) 98 CA4th 1158, 1173-74. The mortgage lender must inform the borrower
of the amount due to reinstate the loan. Anderson, supra at 217. Civil Code 2924c was enacted to allow a
borrower to cure a default and reinstate a loan at least 5 business days prior
to any sale regardless of whether the loan has been accelerated under the
powers of a deed of trust. See
Civil Code 2924c(a)(1), (e).
Here, no request for a reinstatement amount was made and Plaintiff
does not allege any facts to establish
that any amount noted in the Notice of Default or Notice of Trustee’s Sale was
erroneous. Orcilla (2016) 244
CA4th 982, 1001 (where plaintiffs did not allege they attempted to cure the
default by making required monthly payments, the California Court of Appeal
“conclude[d] they do not adequately allege violations of section 2924c”). Here, Plaintiff does not allege any facts
showing she sought or attempted to cure the default, nor does the complaint allege facts showing that Plaintiff could have
tendered the deficient amount to Defendant, but her attempt to do so was
thwarted in some manner. Instead,
Plaintiff essentially claims that the Loan’s indebtedness and/or force-placed
insurance amounts added to the total indebtedness as reflected in the Notice of
Sale was improper. (Complaint ¶¶46-48). Civil Code 2924c only applies to
reinstatement/redemption amounts, not payoff amounts, and even so, any such
fees added to the Loan’s total indebtedness, if true, were authorized because
Civil Code 2924c also allows for the lender to demand such amounts for
“insurance premiums, or advances actually known by the beneficiary.” Plaintiff’s Loan was in default for nearly
five (5) years, and she fails to establish that any application of force-placed
insurance premiums would be improper or unauthorized, nor does she set forth
any facts to show that Defendant did not incur such amounts, or that she
advised Defendant of her own purported policy which Defendant refused to
consider.
Civil Code section 2924d(a)(1) provides that “[c]ommencing
with the date that the notice of sale is deposited in the mail ... and until
the property is sold pursuant to the power of sale contained in the mortgage or
deed of trust, a beneficiary, trustee, mortgagee, or his or her agent or
successor in interest may demand and receive from a trustor, mortgagor ...
those reasonable costs and expenses, ... that are actually incurred in
enforcing the terms of the obligation and trustee’s or attorney's fees that are
hereby authorized to be in an amount as follows: [Schedule of Fees].” Here,
Plaintiff appears to claim a charge of $4,960.00 was improper under the
schedule set forth in this section by $46.45. (Complaint ¶47). However, Plaintiff fails to establish any
prejudice or damages caused by this, nor does Plaintiff establish she could
have or would have been able to reinstate the Loan to cure the default had the
alleged $46.45 discrepancy not occurred.
“[T]he law does not concern itself with trifles.” Lueras (2013) 221 CA4th 49, 79; Civil
Code 3533.
Moreover, Plaintiff fails to establish the purported
$4,960.00 amount was incurred for any applicable fees which Civil Code 2924d
potentially governs. “Civil Code sections
2924c and 2924d provide for maximum sums that may be claimed as expenses of
foreclosing on the property. These
maximum amounts do not include other costs, including legal fees, which may be
incurred by a creditor in protecting the security.” Jones (2005) 127 CA4th 542, 548 (citing
Caruso (1991) 229 CA3d 667, 676. “Such
costs and fees [incurred by a creditor in protecting the security] … are not
limited by Civil Code sections 2924c or 2924d.” Id. Plaintiff does not allege any facts to show the purported $4,960.00 was
improper or consisted of anything other than recoverable attorney’s fees and
costs incurred by Defendant to protect the security which are not applicable to
section Civil Code 2924d. Defendant
contends that it has been forced to incur substantial legal fees and costs to
protect Wilmington’s interest (i.e., litigation defense costs, bankruptcy
costs, etc.) due to Plaintiff’s delay tactics, all of which are not governed or
limited under Civil Code 2924d.
Further, Plaintiff’s claim fails because Plaintiff’s
allegations relate to purportedly erroneous figures in either the Notice of
Default or Notice of Trustee’s Sale itself and Civil Code 2924c or 2924d only
regulate costs that can be demanded after the recording of these foreclosure
notices in any reinstatement demand. See
Walker, supra at 1174.
Finally, Plaintiff has failed to allege facts to show how
the alleged irregularities were prejudicial to her interests which is required
to state a claim. See Kalnoki
(2017) 8 CA5th 23, 48.
Notably, Plaintiff fails to address her 3rd
cause of action in the opposition to the demurrer. (See Opposition, generally).
4TH CAUSE OF ACTION – VIOLATION OF BUSINESS
& PROFESSIONS CODE 17200
Plaintiff’s unfair competition law claim is based on the
violations alleged in her prior causes of action. (Complaint ¶¶53-57). Since those claims are deficient, so is the 4th
cause of action. Rubin (N.D. Cal.
2009) 599 F.Supp.2d 1176, 1179; Krantz (2001) 89 CA4th 164, 178.
CONCLUSION
Based on the foregoing, the demurrer to all of the causes
of action in Plaintiff’s complaint is sustained. Due to the liberal policy of allowing leave
to amend and because this is only the original complaint, Plaintiff is given
the opportunity to try to cure the defects in her pleading.