Judge: Melvin D. Sandvig, Case: 22CHCV01449, Date: 2023-03-13 Tentative Ruling

Case Number: 22CHCV01449    Hearing Date: March 13, 2023    Dept: F47

Dept. F47

Date: 3/13/23

Case #22CHCV01449

 

DEMURRER TO THE ORIGINAL COMPLAINT

 

Demurrer filed on 1/23/23.

 

MOVING PARTY: Defendant Nations Direct Mortgage dba Motive Lending

RESPONDING PARTY: Plaintiffs Sarkis Joe Sepian and Arousig Aline Sepian

NOTICEL ok

 

Demurrer is to the entire complaint:

            1.  Violation of Civil Code 2923.5

            2.  Violation of Civil Code 2923.6(c)(1)

            3.  Violation of Civil Code 2923.7

            4.  Violation of Business & Professions Code 17200

 

RULING: The demurrer is sustained with 30 days leave to amend. 

 

This action arises out of Plaintiffs Sarkis Joe Sepian and Arousig Aline Sepian’s (Plaintiffs) claims that their lender, Defendant Nations Direct Mortgage dba Motive Lending (Defendant) violated several provisions of the Homeowners Bill of Rights (HOBR) after Plaintiffs defaulted on their loan secured by property located at 19234 Napa Street, Northridge, California 91324 (the Property).  On 12/20/22, Plaintiffs filed this action for: (1) Violation of Civil Code 2923.5; (2) Violation of Civil Code 2923.6(c)(1); (3) Violation of Civil Code 2923.7 and (4) Violation of Business & Professions Code 17200. 

 

Plaintiffs claim that Defendant: (1) failed to speak with them to determine their financial situation or to complete the required steps to reach them before initiating foreclosure; (2) violated the prohibition on “dual tracking” foreclosure while a “complete” loan modification application is pending by recording both a Notice of Default (NOD) and a Notice of Sale (NOS); (3) failed to appoint a “single point of contact” or “SPOC” to assist them with the application process; and (4) committed a breach of Business & Professions Code 17200 based on these alleged HOBR violations.    

 

After Plaintiffs’ counsel failed to respond to Defendant’s counsel’s efforts to meet and confer regarding deficiencies in the complaint, on 1/23/23, Defendant filed and served the instant demurrer to all of the causes of action in the complaint on the ground that each cause of action fails to state sufficient facts to constitute a cause of action.  CCP 430.10(e).  Plaintiffs have opposed the demurrer and Defendant has filed a reply to the opposition. 

 

1ST CAUSE OF ACTION – VIOLATION OF CIVIL CODE 2923.5

 

In their 1st cause of action, Plaintiffs claim that Defendant failed to satisfy the “actual contact” or the “due diligence” requirement to contact them set forth in Civil Code 2923.5 before recording the Notice of Default (NOD).  See Civil Code 2923.5(a)(2), (e); (Complaint ¶¶48-49, 51).  However, Plaintiffs also claim that Defendant recorded the NOD without providing them with a written determination of their July 2022 loan modification application, advising Plaintiffs of their appeal rights or providing them with the opportunity to appeal.  (Complaint ¶64).  Additionally,  Plaintiffs concede that they received a COVID-related loan payment forbearance, that a second or extended forbearance was denied, and then Plaintiffs applied for a loan modification.  (Complaint ¶¶17, 18, 19, 28, 29, 48).  Such allegations seemingly concede that Plaintiffs were in contact with Defendant to explore foreclosure alternatives which is the underlying purpose of Civil Code 2923.5.  Further, Plaintiffs do not allege that a sale of the Property has occurred and a trustee’s deed upon sale is not attached to the complaint.  As such, it appears that Plaintiffs have obtained all remedies available for any purported violation of Civil Code 2923.5.  See Mabry (2010) 185 CA4th 208, 214 (a borrower’s remedy for violation of Civil Code 2923.5 is a postponement of an impending foreclosure to permit the lender to comply with Civil Code 2923.5).

 

In the opposition to the demurrer, Plaintiffs fail to address the arguments made by Defendant as to this cause of action.  (See Opposition, generally).

 

2ND CAUSE OF ACTION – VIOLATION OF CIVIL CODE 2923.6(c)(1)   

 

Civil Code 2923.6 prohibits “dual tracking” (i.e., recording a Notice of Default and/or a Notice of  Sale or going to sale while a “complete” loan modification application is pending or during the 30-day period to appeal a denial).  Civil Code 2923.6(c)(1).  Here, Plaintiffs claim Defendant violated Civil Code 2923.6 by recording the NOD on 8/4/22.  However, Plaintiffs have made contradictory allegations as to when their loan modification application was complete (9/20/22 v. July 2022).  (See Complaint ¶¶19, 20, 63 and Ex.B thereto).  Additionally, Plaintiffs allege that Defendant did not consider the 9/20/22 application complete as Defendant requested additional documents after such date.  (Complaint ¶¶21, 22, 28).  As such, Plaintiffs have failed to clearly and sufficiently allege the facts which form the bases of this cause of action. 

 

In their opposition, Plaintiffs have also failed to address the arguments made by Defendant as to this cause of action.  (See Opposition, generally). 

 

3RD CAUSE OF ACTION – VIOLATION OF CIVIL CODE 2923.7     

 

Plaintiffs claim that Defendant violated Civil Code 2923.7 by failing to appoint a proper single point of contact (SPOC) to assist them with their loss mitigation application.  (Complaint ¶¶71-85).  Within this cause of action, Plaintiffs confusingly allege that the Notice of Sale was negligently recorded on 10/29/21.  (Complaint ¶¶86-99).  However, the Notice of Sale for the Property was not recorded until 12/5/22.  (See Complaint, Ex.C).

 

A SPOC may be an individual or a team of personnel.  Civil Code 2923.7(e).  Plaintiffs concede that they avoided foreclosure by obtaining a forbearance due to COVID and then communicated with various individuals from Defendant regarding their loan modification application, albeit claiming that none of them were familiar with their file.  (Complaint ¶¶17, 21, 24-28, 31, 32, 34, 75). 

 

Based on the foregoing, Plaintiffs have failed to allege sufficient facts to establish that any purported violation of Civil Code 2924.7 was material which is required to state a claim.  See Civil Code 2924.12.

 

4TH CAUSE OF ACTION – VIOLATION OF BUSINESS & PROFESSIONS CODE 17200

 

California's Unfair Competition Law (UCL) (Business & Professions Code 17200 et seq.) prohibits unfair competition, which is defined as any unlawful, unfair or fraudulent business act or practice.  To establish standing under the UCL, a plaintiff must: (1) establish a loss or deprivation of money sufficient to qualify as injury in fact, i.e., economic injury, and (2) show that the economic injury was the result of/caused by the unfair business practice that is the gravamen of the claim.  See Kwikset Corp. (2011) 51 C4th 310, 337. 

 

Plaintiffs base their unfair competition claim on the purported violations of Civil Code 2923.5, 2923.6 and 2923.7 which form the bases of the 1st – 3rd causes of action.  As noted above, Plaintiffs have failed to adequately plead facts to establish a violation of the foregoing statutes by Defendant.  As such, the 4th cause of action also fails to state a claim. 

 

CONCLUSION

 

Based on the foregoing, the demurrer is sustained.  Due to the liberal policy of allowing leave to amend and because this is only the original complaint, Plaintiffs are given the opportunity to try to cure the defects in their pleading.

 

The Court notes that both the complaint and Plaintiffs’ opposition to the demurrer seem to confuse the facts of this case with another case.  For example, as noted above, the complaint alleges that the Notice of Sale was recorded on 10/29/21 when an exhibit attached to the complaint shows that it was recorded on 12/5/22.  (See Complaint ¶86 and Ex.C thereto).  Additionally, the opposition refers to the 4th cause of action for violation of Business & Professions Code 17200 as the 6th cause of action, includes facts not alleged in the complaint (i.e., regarding alleged fraudulent statements which induced Plaintiffs to liquidate business assets) and contains argument regarding a wrongful foreclosure cause of action which is not contained in the complaint.  (See Opposition, p.3:9-13, p.4:6, p.7:1-5).  In an amended pleading, Plaintiffs’ counsel must take care to clearly allege facts applicable to and in support of these particular Plaintiffs’ claims against Defendant.