Judge: Michael Shultz, Case: 24STCV29778, Date: 2025-04-24 Tentative Ruling
Case Number: 24STCV29778 Hearing Date: April 24, 2025 Dept: 40
24STCV29778 Warren Howell v.
Newrez LLC, et al.
Thursday,
April 24, 2025.
[TENTATIVE] ORDER
SUSTAINS DEFENDANT’S DEMURRER TO THE FIRST AMENDED COMPLAINT
I.
BACKGROUND
On November 13, 2024, Plaintiff
Warren Howell (“Plaintiff”) filed this action against Defendants Newrez LLC
d.b.a. Shellpoint Morgtate Servicing, Wilmington Savings Fund Society, FSB, Not
in Its Individual Capacity but Solely as Owner Trustee for Verus Securitization
Trust 2021-4 and Does 1 through 10. The Complaint alleges causes of action for:
(1) violation of Civ. Code §2923.5; (2) violation of Civ. Code §2924.9; (3)
wrongful foreclosure; and (4) violation of Bus. & Prof. Code §17200, et seq.
This action arises from a foreclosure of Plaintiff’s property after Plaintiff failed
to make mortgage payments.
A.
Motion filed March 27, 2025.
Defendants Newrez LLC d.b.a.
Shellpoint Morgtate Servicing, Wilmington Savings Fund Society, FSB, Not in Its
Individual Capacity but Solely as Owner Trustee for Verus Securitization Trust
2021-4 (“Defendants”) filed the instant demurrer to Plaintiff’s Complaint
without a motion to strike.
B.
Opposition filed on April 7, 2025.
Plaintiff argues that the demurrer
should be overruled because Defendants engaged in unlawful and unfair conduct with
Plaintiff and as a result, suffered a foreclosure on the Subject Property. Plaintiff
argues that it has sufficiently pled facts that Defendants did not comply with
the HBOR which resulted in wrongful foreclosure of the Subject Property and
constitute unfair business practices.
C.
Reply filed on April 17.
Defendants reassert that
Plaintiff’s bases for all causes of action, violation of the HBOR, are
inapplicable.
Defendants’ request for judicial notice of four exhibits related
to Plaintiff’s bankruptcy action and Trustee's Deed Upon Sale. The Court GRANTS
Defendants’ request for judicial notice. (Evid. Code § 452, subds. (d), (h).) The
Court takes judicial notice only as to the existence, content, and authenticity
of such documents; it does not take judicial notice of the truth of the factual
matters asserted therein. (Dominguez v. Bonta (2022) 87 Cal. App. 5th
389, 400.)
IV.
LEGAL STANDARDS
Before filing a demurrer, the
demurring party is required to meet and confer with the party who filed the
pleading for the purpose of determining whether an agreement can be reached
that would resolve the objections to be raised in the demurrer. (Code Civ.
Proc. § 430.41(a).) Here, the Court
finds that the meet and confer requirement pursuant to Code of Civil Procedure
section 430.41, subdivision (a)(3)(B) is satisfied. (Sypek Decl., ¶¶ 5-6.)
A demurrer for sufficiency tests
whether the complaint states a cause of action. (Hahn v. Mirda (2007)
147 Cal.App.4th 740, 747.) When considering demurrers, courts read the
allegations liberally and in context. In a demurrer proceeding, the defects
must be apparent on the face of the pleading or via proper judicial notice. (Donabedian
v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.)
“A demurrer tests the pleadings
alone and not the evidence or other extrinsic matters. Therefore, it lies only
where the defects appear on the face of the pleading or are judicially noticed.
(Code Civ. Proc. §§ 430.30, 430.70.) At the pleading stage, a plaintiff need
only allege ultimate facts sufficient to apprise the defendant of the factual
basis for the claim against him. (Semole v. Sansoucie (1972) 28 Cal.
App. 3d 714, 721.) A “demurrer does not, however, admit contentions, deductions
or conclusions of fact or law alleged in the pleading, or the construction of
instruments pleaded, or facts impossible in law.” (S. Shore Land Co. v.
Petersen (1964) 226 Cal.App.2d 725, 732 [internal citations omitted].) “While
the allegations [of a complaint] must be accepted as true for purposes of
demurrer, the facts appearing in exhibits attached to the complaint will also
be accepted as true and, if contrary to the allegations in the pleading, will
be given precedence.” (Moran v. Prime Healthcare Management, Inc. (2016) 3 Cal.App.5th 1131, 1145–1146 [internal quotations
omitted].)
V.
DISCUSSION
A.
First Cause of
Action Violation of Civil Code § 2923.5
Plaintiff’s first two causes of
actions are for a violation of provisions of the California Civil Code (“Civ.
Code”) §§ 2923.5 and 2924.9, or the California Homeowners’ Bill of Rights (“HBOR”).
As to the first and second causes of action, Defendant asserts that Plaintiff fails
to state facts sufficient to constitute a cause of action against Defendants
because HBOR is inapplicable, as the real property at issue was not
"owner-occupied" as defined by Civil Code § 2924.15, the Complaint
does not allege actual economic injury suffered by Plaintiff, and the Complaint
does not allege any acts by Defendants which are violative or materially
violative of the statute.
Civil Code § 2923.5(a) provides
that, at least 30 days before recording a notice of default, a mortgagee,
trustee, beneficiary, or authorized agent must contact the borrower in the
manner described in Civil Code § 2923.5(a)(2), or exercise due diligence in
attempting to contact the borrower in the manner described in Civil Code §
2923.5(e). Civil Code § 2924.15 restricts the application of § 2923.5 to a
first lien mortgage or deed of trust that is “owner occupied,” meaning, secured
by real property which is the principal residence of the borrower and is
security for a loan made for personal, family, or household purposes.
Civil Code § 2924.19(b) provides a
borrower with a private right of action for actual economic damages against a
mortgage servicer, mortgagee, beneficiary, or authorized agent for “a material
violation of Section 2923.5, 2924.17, or 2924.18 by that mortgage servicer,
mortgagee, beneficiary, or authorized agent where the violation was not corrected
and remedied prior to the recordation of the trustee’s deed upon sale.”
As to the HBOR’s owner occupied
requirement, Plaintiff alleges that the Subject Property, located at 10022 S
Manhattan Place “is his personal and principal residence.” (Compl., ¶¶ 1, 23.) and
“Plaintiff was living in the Subject Property when the Notice of Default was
recorded.” (Compl., ¶ 33.) The Complaint attaches a 2019 Affidavit- Death of
Trustee and 2017 death certificate at Exhibit A, which states a 10522 Cimarron
(“Cimarron”) mailing address for Plaintiff. The Complaint attaches the Deed of
Trust at Exhibit B. The Deed of Trust includes a I-4 Family Rider and a 2021 Business-Purpose
Loan Rider that states that “The Security Instrument, as amended by this Rider,
is for a business purpose mortgage loan.” (Compl., Ex B) The Complaint attaches
mail from Shellpoint Morgtage Servicing addressed to Plaintiff at the Cimarron
address. (Compl., Ex. F-H.) Plaintiff does not address the argument that the Subject
Property is not owner occupied. The Court finds that the evidence attached to
the Complaint indicated that the Subject Property is not Plaintiff’s principal
residence and is not security for a loan made for personal, family, or
household purposes as required by § 2924.15. This evidence is given precedence
over the Complaint’s allegation that the Subject Property is Plaintiff’s
principal residence. Plaintiff makes no argument in opposition that the Subject
Property is Plaintiff’s principal residence or that the loan underlying the
deed of trust at issue was made for personal, family, or household purposes. The
Court finds that the § 2923.5 is inapplicable to the Subject Property.
The Complaint does not allege a
violation of section § 2923.5. The Complaint alleges that Plaintiff “was
staying in his home when the Notice of Default was issued, and [he] received no
mail or messages.” (Compl. ¶ 27.) The Complaint attaches at Exhibit D the
Notice of Default which contains a “Beneficiary’s Declaration of Compliance
with Civil Code § 2923.5 and Authorization of Agent for Notice of Default”
(“Beneficiary Declaration”), in which Newrez Loss Mitigation Specialist Alfonso
Ramirez attested under penalty of perjury “The beneficiary or beneficiary’s
authorized agent has exercised due diligence to contact the borrower as
required by California Civil Code § 2923.5(e) and, after waiting two (2) weeks
after the telephone call requirements of Civil Code 2923.5(e)(2)(A) were
satisfied, the beneficiary or the beneficiary’s authorized agent sent to the
borrower(s), by certified mail, return receipt requested, the letter required
by Civil Code § 2923.5(e)(3), which was mailed on September 28, 2023.” (Compl.
¶¶ 13, Exh. D.) The Complaint does not allege that Defendants did not comply
with 2923.5(e).
The Complaint does not allege
actual economic damages required by Section 2924.19(b). “Correct application of
the statutory language requires a three-step analysis. The first step is to
evaluate whether the plaintiff alleges actual economic damages. If there are no
actual economic damages, there is no need to go further. The claim fails.” (Morris
v. JPMorgan Chase Bank, N.A. (2022) 78 Cal.App.5th 279, 303 [internal
quotations omitted].) The Complaint alleges that Plaintiff “has suffered an actual,
pecuniary injury of the loss of the equity in the value of Subject Property,
and the costs of seeking a remedy for Defendants wrongful actions.” (Compl. ¶
51). These categories are not economic damages. (Id. at 304.)
Defendants’ demurrer to the first
cause of action is SUSTAINED.
B.
Second Cause
of Action for Violation of § 2924.9
Civil Code § 2924.9 imposes a duty
on servicers to communicate with borrowers in default concerning foreclosure
prevention alternatives. Civil Code § 2924.15 restricts the application of §
2923.5 and 2924.9 to a first lien mortgage or deed of trust that is “owner
occupied,” meaning, secured by real property which is the principal residence
of the borrower and is security for a loan made for personal, family, or
household purposes.
Section 2924.12 (b) provides “After
a trustee’s deed upon sale has been recorded, a mortgage servicer, mortgagee,
trustee, beneficiary, or authorized agent shall be liable to a borrower for
actual economic damages. . .resulting from a material violation of Section…2924.9.
. .by that mortgage servicer, mortgagee, trustee, beneficiary, or authorized
agent where the violation was not corrected and remedied prior to the
recordation of the trustee’s deed upon sale.
As discussed above, the Court
finds that Civil Code § 2924.9 is inapplicable to the Subject Property. The
Complaint alleges Plaintiff did not receive foreclosure prevention alternatives
in violation of § 2924.9, “PLAINTIFF did not receive any phone calls or phone
messages, and did not receive any pieces of mail that referred to discussions
about alternatives to foreclosure before it was commenced.” (Compl., ¶¶ 24.) The
Complaint, however, suggest that Plaintiff
engaged in foreclosure prevention alternatives “. . .purposefully impeded
timely loss mitigation denial or approval while expressing that PLAINTIFF is in
review prevents PLAINTIFF from seeking other external loss mitigation options.”
(Compl., 33, 47a-d.) Finally, as stated above, Plaintiff does not sufficiently
allege actual economic injury. Thus, the Court SUSTAINS Defendants’ demurrer to
the second cause of action.
C.
Third Cause
of Action Wrongful Foreclosure
The elements of a wrongful
foreclosure cause of action are: (1) the trustee or mortgagee caused an
illegal, fraudulent, or willfully oppressive sale of real property pursuant to
a power of sale in a mortgage or deed of trust; (2) the party attacking the sale
was prejudiced or harmed from the wrongful foreclosure; and (3) in cases where
the trustor or mortgagor challenges the sale, the trustor or mortgagor tendered
the amount of the secured indebtedness or was excused from tendering. (Reeder v. Specialized Loan Servicing LLC, (2020) 52 Cal. App. 5th 795.)
The Complaint alleges “On
September 25, 2024, [Defendants] wrongfully foreclosed on the Subject Property
based upon violations of Civ.Code §§ 2923.5 and 2924.9.” (Compl., ¶ 36.)
Because the Court sustains Defendants’ demurrer to the underlying first and
second causes of action for violation of sections 2923.5 and 2924.9, the Court
sustains Defendants’ demurrer to the third cause of action.
D. Fourth
Cause of Action Violation of Business & Professions Code § 17200, et seq
The Complaint alleges that
Defendants violated California’s Unfair Competition Law (“UCL”) by “[i]mplement[ing]
a severely flawed loss mitigation review process in which borrowers, like
PLAINTIFF, are persuaded to rely on [Defendants’] loan modification review
process; purposefully imped[ing] timely loss mitigation denial or approval
while expressing that PLAINTIFF is in review prevents PLAINTIFF from seeking
other external loss mitigation options including abandoning the property and/or
short sale; ignor[ing] PLAINTIFF’s communications and failed to communicate
with PLAINTIFF regarding the financial distress regarding mortgage loan
repayment; purposely violat[ing] Civ. Code §§2923.5 and 2924.9.” (Compl. ¶ 47(c)-(e).)
As discussed above, the Court finds that violations of Civ. Code §§2923.5 and
2924.9 are not sufficiently pled because the Complaint and its evidence shows
that the Subject Property’s Deed of Trust does not fall within the scope of Civil
Code § 2924.15’s owner occupied requirement. Because the fourth cause of action
is based on Defendants’ alleged conduct in violation of sections 2923.5 and
2924.9, the Court sustains Defendants’ demurrer to the fourth cause of action.
VI.
CONCLUSION
Based
on the foregoing, the Court SUSTAINS Defendant’s Demurrer to the first, second,
third, and fourth causes of action. A plaintiff
is entitled leave to amend a defective complaint if plaintiff can demonstrate a
reasonable possibility that the defect can be cured, it is the plaintiff’s
burden to articulate the “specific ways” to cure the identified defect. (Shaeffer
v. Califia Farms, LLC (2020) 44 Cal.App.5th 1125, 1145, [No abuse of
discretion where the plaintiff “proffered no specific amendments to the trial
court.”]; Mohler v. County of Santa Clara (2023) 92 Cal. App.5th
418, 428 [leave
to amend properly denied where plaintiff failed to describe what additional
facts she would plead to cure defect].) The
court has discretion to sustain a demurrer, without leave, if the defect cannot
be cured as a matter of law given the undisputed facts. " ‘Leave to amend
should be denied only where the facts are not in dispute, and the nature of the
plaintiff's claim is clear, but under substantive law, no liability exists, and
no amendment would change the result.’ ” (Jo Redland Trust, U.A.D. 4-6-05 v.
CIT Bank, N.A. (2023) 92 Cal. App. 5th 142, 162, citing Howard
v. County of San Diego (2010) 184 Cal.App.4th 1422, 1428; Lawrence
v. Bank of America (1985) 163 Cal. App. 3rd 431, 436, [“Leave
to amend should be denied where the facts are not in dispute
and the nature of the claim is clear, but no liability exists under substantive
law.”], (emphasis added).) Given the defects in the complaint, the Court is inclined
to deny leave to amend but will hear from Plaintiff at the hearing.