Judge: Melvin D. Sandvig, Case: 23CHCV02262, Date: 2024-11-22 Tentative Ruling
Case Number: 23CHCV02262 Hearing Date: November 22, 2024 Dept: F47
Dept. F47
Date: 11/22/24
Case #23CHCV02262
DEMURRER TO THE
THIRD AMENDED COMPLAINT
Demurrer filed on 9/30/24.
MOVING PARTY: Defendant Rushmore Servicing, formerly
known as Rushmore Loan Management Services, LLC
RESPONDING PARTY: Plaintiff Hermina
Gazmarian as Executor
of the Estate of Edward Babalians
NOTICE: ok
Demurrer is to the entire Third Amended Complaint:
2.
Violation of Civil Code 2923.6
3.
Violation of Civil Code 2923.7
4.
Violation of Civil Code 2924.17
5.
Violation of Business & Professions Code 17200
RULING: The demurrer is sustained with 30 days
leave to amend.
SUMMARY OF FACTS & PROCEDURAL HISTORY
This action arises out of foreclosure proceedings against
property owned by Edward Babalians (“Babalians”).
In April 2007, Babalians obtained a mortgage loan on
property commonly known as 17239 Chatsworth Street, Unit #1, Granada Hills, CA
91344 (the “Property”) from Lender Inter Mountain Mortgage in the amount of
$143,000.00, memorialized by a Deed of Trust. (TAC ¶¶ 1, 10 and Ex.A thereto).
The Third Amended Complaint alleges that in June 2022 Babalians
submitted a loss mitigation application to Defendant Rushmore Servicing,
formerly known as Rushmore Loan Management Services, LLC (Rushmore). (TAC¶ 14).
The Third Amended Complaint alleges that a notice of default was
recorded on 8/23/22 and on 12/6/22, a notice of trustee’s sale was recorded. (TAC ¶¶15, 21 and Ex.B and C thereto).
The Third Amended Complaint alleges that Babalians filed
bankruptcy on 12/30/22. (TAC ¶26). The Third Amended Complaint alleges that
Babalians requested a reinstatement quote from Rushmore but was not provided
one until 1/2/23. (TAC ¶27). Babalians’ December bankruptcy case was
dismissed on 1/17/23. (See
Request to Take Judicial Notice (“RJN”), Ex. 1).
Babalians filed another bankruptcy case on 1/19/23. (RJN, Ex.2).
Babalians’ 2023 bankruptcy case was dismissed on 2/6/23. (RJN, Ex.2).
The foreclosure sale was held on 2/7/23.
(TAC
On 7/31/23, Babalians filed this action against Rushmore
and others alleging various causes of action for violation of the Homeowners’
Bill of Rights. After filing the
complaint, Babalians died. In response
to Rushmore’s demurrer to the original complaint, a First Amended Complaint was
filed by Plaintiff Hermina Gazmarian as Executor of the Estate of Edward
Babalians (Plaintiff). Pursuant to a
stipulation between the parties, on 4/24/24, Plaintiff filed a Second Amended
Complaint alleging causes of action for: (1) Fraud; (2) Violation of Civil Code
2923.5; (3) Violation of Civil Code 2923.6; (4) Violation of Civil Code 2923.7;
(5) Violation of Civil Code 2924.17 and (6) Violation of Business &
Professions Code 17200.
After meet and confer efforts failed to resolve the
issues Rushmore had with the Second Amended Complaint, on 6/20/24, Rushmore
filed and served a demurrer to the entire Second Amended Complaint. On 7/30/24, this Court sustained the demurrer
to the Second Amended Complaint with 30 days leave to amend. (See 7/30/24 Minute Order).
On 8/30/24, Plaintiff filed the subject Third Amended
Complaint which alleges causes of action for: (1) Fraud; (2) Violation of Civil
Code 2923.6; (3) Violation of Civil Code 2923.7; (4) Violation of Civil Code 2924.17 and (5) Violation
of Business & Professions Code 17200.
After meet and confer efforts failed to resolve the issues Rushmore had
with the Third Amended Complaint, on 9/30/24, Rushmore filed and served the
instant demurrer to the entire Third Amended Complaint. Plaintiff has opposed the demurrer and
Rushmore has filed a reply to the opposition.
ANALYSIS
Rushmore’s Request for Judicial Notice (RJN) is
granted.
Judicial Estoppel/Bankruptcy
In the opposition, Plaintiff argues that Rushmore
“attempts to argue that the causes of action in the present action were undeclared
assets at the time of the bankruptcy filing in December, 2022. As a result, they claim that the current
cause of action should be the property of the trustee and hence plaintiff
should be estopped from bringing this claim.”
(See Opposition, p.6:1-16).
While Rushmore made such argument in its demurrer to the Second Amended
Complaint, the judicial estoppel argument is not included in the demurrer to
the Third Amended Complaint. (See
Demurrer, generally). In ruling on the
demurrer to the Second Amended Complaint, the Court noted that Rushmore had “failed to establish that Babalians’ failure to disclose
the claims which are the subject of this action in his bankruptcy filings
judicially estops Plaintiff from asserting them in this action. Based on the relief sought in the Second
Amended Complaint, the damages did not accrue until the foreclosure sale
occurred on 2/7/23, after Babalians’ bankruptcy was dismissed.” (See 7/30/24 Minute Order, p.3). To the extent that Rushmore contends that
Plaintiff is estopped from pursuing the claims in this action based on Babalians’
bankruptcy proceedings, the Court, again, finds that Rushmore has failed to
establish same.
Standing
Plaintiff has now filed a declaration pursuant to CCP
377.32 which states that she is Babalians’ successor-in-interest as defined by
CCP 377.11. (See TAC, Ex.G). Additionally, in the opposition, Plaintiff
argues that Plaintiff’s declaration filed with the Third Amended Complaint
establishes her authority to proceed as the successor-in-interest. (See Opposition, p.5:10-12). However, Plaintiff has not brought this
action as Babalians’ successor-in-interest.
Rather, the Third Amended Complaint indicates that Plaintiff brings this
action “as Executor of the Estate of Edward Babalians.” (See TAC, title page and ¶2). Plaintiff’s declaration states that “[n]o
proceeding is now pending in California for administration of the decedent’s
estate.” (TAC, Ex.G ¶5); See CCP
377.32(a)(3). Plaintiff also does not
include a copy of a final order showing the distribution of the decedent’s
cause of action to the successor-in-interest, if decedent’s estate was
administered. See CCP 377.32(a)(4). As such, Plaintiff has failed to establish
that she is the Executor of Babalians’ estate and/or that she has standing to
bring this action as such.
Plaintiff also fails to provide authority for the
conclusory argument in the opposition that this action can “validly be
maintained by the executor of [Babalians’] estate.” (See Opposition, p.5:13-14). It appears that Plaintiff may be conflating being
the executor of an estate with being a successor-in-interest.
Plaintiff has also failed to establish that the quit
claim deed executed in 2022 whereby Babalians granted title to the Property to
Hermina Gazmarian provides Plaintiff with standing to bring this action as a third-party
beneficiary of the loan agreement which was executed years before in 2007. Plaintiff has alleged no facts which
establish that the contracting parties to the loan agreement intended to confer
a benefit on Plaintiff at the time the loan agreement was made. See Spinks (2009) 171 CA4th
1004, 1022-1023; Neverkovec (1999) 74 CA4th 337, 348. Also, as noted above, Plaintiff has not filed
the Third Amended Complaint in her individual capacity but rather as the
purported Executor of the Estate of Edward Babalians.
Based on the foregoing, Plaintiff has still failed to
establish her standing to continue this action.
1st cause of action - Fraud
The elements of a fraud cause of action are: (1) misrepresentation
(a false representation, concealment, or nondisclosure), (2) knowledge of
falsity, (3) intent to defraud (to induce reliance), (4) justifiable reliance,
and (5) resulting damage. Agosta
(2004) 120 CA4th 596, 603. Additionally,
a fraud cause of action must be pled with factual specificity including facts
showing how, when, where, to whom, and by what means the representations were
tendered.. Lazar (1996) 12 C4th
631, 645. When pleading facts against a
corporate defendant, a plaintiff must allege the names of the persons who made
the allegedly fraudulent representations, their authority to speak, to whom
they spoke, what they said or wrote and when it was said or written. Id; Tarmann (1991) 2 CA4th 153,
157.
Plaintiff alleges that Rushmore made misrepresentations
to Babalians that “he won’t have other options to avoid foreclosure by asking
him to submit a mortgage assistance application without even exploring his
financials.” (TAC ¶56). Additionally, Plaintiff alleges that a Rushmore
agent’s alleged inability to explain why it initiated foreclosure constitutes fraud. (TAC ¶¶67-68). Based on the foregoing, it is not clear what,
if any, specific misrepresentations were made to Babalians.
However, Plaintiff also alleges that Rushmore knowingly misrepresented
to Babalians that he would be able to reinstate the past due balance on the
loan at any time prior to the 2/7/23, 10:00 A.M. Trustee’s Sale. (TAC ¶¶74-75). Plaintiff alleges that despite Babalians’
tendering the reinstatement funds in the form of a wire on 2/7/23 at 9:00 a.m.,
Rushmore returned the reinstatement funds and proceeded with the foreclosure
sale. (TAC ¶¶30-33, 54, 71-73). Plaintiff has also alleged Rushmore’s intent
to induce Babalians’ reliance and Babalians’ reasonable reliance on the misrepresentation
which resulted in the loss of the property.
(See TAC ¶¶76-79). As
such, if Plaintiff can establish her standing to proceed with this action, a
sufficient basis for the fraud cause of action has been alleged.
2nd cause of action – Violation of Civil
Code 2923.6
Civil Code 2923.6 requires the submission of a complete loan
modification application at least 5 business days before a scheduled
foreclosure sale to prevent the sale from proceeding. See Civil Code 2923.6(c). Plaintiff has alleged that Babalians
submitted a complete loan modification application in June of 2022 which is
sufficient at the pleading stage to support the claim. (TAC ¶88).
Contrary to Rushmore’s assertion, such allegation does not constitute a
sham pleading as it merely clarifies uncertainties in the prior
complaints.
3rd cause of action – Violation of Civil
Code 2923.7
Civil Code 2923.7 requires a loan servicer to appoint a
single point of contact (SPOC) after a borrower requests a foreclosure
prevention alternative. Civil Code 2923.7(a). The SPOC is responsible for providing
information to the borrower and for having access to people who can halt the
foreclosure sale when appropriate. Civil
Code 2923.7(b). The SPOC can be an
individual or a team of personnel. Civil
Code 2923.7(e).
As noted in the Court’s ruling on the demurrer to the
Second Amended Complaint, the Court still finds that Plaintiff has sufficiently
alleged Rushmore failed to provide a SPOC in violation of Civil Code 2923.7. (See 7/30/24 Minute Order, p.5; TAC
¶¶104-107). However, the cause of action
still fails due to the standing issue noted above.
4th cause of action – Violation of Civil
Code 2924.17
Civil Code 2924.17 provides that “[a] declaration
recorded pursuant to Section 2923.5 or ... pursuant to Section 2923.55, a
notice of default, notice of sale, assignment of a deed of trust, or
substitution of trustee recorded by or on behalf of a mortgage servicer in
connection with a foreclosure subject to the requirements of Section 2924, or a
declaration or affidavit filed in any court relative to a foreclosure
proceeding shall be accurate and complete and supported by competent and
reliable evidence.” Civil Code 2924.17(a). Civil Code 2924.17(b) provides that “[b]efore
recording or filing any of the documents described in subdivision (a), a
mortgage servicer shall ensure that it has reviewed competent and reliable
evidence to substantiate the borrower’s default and the right to foreclose,
including the borrower’s loan status and loan information.”
Based on the allegations which support the 2nd
and 3rd causes of action which allege violations of Civil Code 2923.6 and 2923.7, Plaintiff has
alleged a sufficient basis to support this cause of action, except for the
standing issue. (See TAC ¶119).
5th cause of action – Violation of Business
& Professions Code 17200
This cause of action is based on the statutory violations
alleged in the 2nd-4th causes of action. (See TAC ¶¶130, 132, 136-138). Since those claims are sufficient, as set
forth above, this cause of action is also sufficiently pled, except for the
standing issue.
CONCLUSION
The demurrer is sustained on the ground that Plaintiff
has failed to sufficiently allege facts to support her standing to continue
this action. The demurrer is overruled
on all other grounds. Plaintiff is given
one last opportunity to clarify her standing to continue this action.
A Fourth Amended Complaint is due to be filed and served
within 30 days.