Judge: Olivia Rosales, Case: 19NWCV00899, Date: 2022-08-11 Tentative Ruling

DEPARTMENT SE-C LAW & MOTION PROCEDURES ARE AS FOLLOWS: APPEARANCES: The Court will hear oral arguments on all matters at the scheduled time of hearing. If all counsel intend to submit on the Tentative Order and do not want oral argument, please advise the clerk, in Department “C”, by calling (562-345-3702). If all sides submit on the Tentative Order and the clerk is so advised, the Tentative Order will become the final order of the court and the prevailing party shall give written Notice of Ruling per CRC 3.1312. If the Moving and Responding parties do not agree to submit on the Tentative Order, the motion will be called as calendared for hearing. There is no need to contact Department “C”, as the matter will remain on calendar for hearing. If the Moving party does not call Department “C” to submit on the Tentative Order and there is no appearance by any party, then the motion(s), at the Court’s discretion, may be taken off calendar without ruling on the motion(s). ORDERS: The minute order reflecting the Court’s Order will constitute the final Order. No additional orders should be submitted to the Court for signature unless required by law or by the Court. Prevailing party shall give written Notice of Ruling per CRC 3.1312. Minute orders, which constitute the final Order of the Court, will only be sent to the parties via U.S. mail  for the following: OSC re: sanctions, OSC re: contempt or matters taken under submission after oral arguments or briefing. Counsel or parties may request copies of all other minute orders/final orders either at the clerk’s office or in writing. If a request is in writing, a self-addressed stamped envelope and the appropriate fee for copies shall be submitted.

Case Number: 19NWCV00899    Hearing Date: August 11, 2022    Dept: SEC


CASE NO.:  19NWCV00899

HEARING:  08/11/22






     I.        Defendants SELECT PORTFOLIO SERVICING, INC. and US BANK, NA’s demurrer to Plaintiffs’ Fourth Amended Complaint is SUSTAINED without leave to amend.


    II.        Defendants SELECT PORTFOLIO SERVICING, INC. and US BANK, NA’s Motion to Strike Portions of Plaintiffs’ Fourth Amended Complaint is MOOT.


Moving Parties to give Notice.


Defendants SELECT PORTFOLIO SERVICING, INC. and US BANK, NA’s Request for Judicial Notice is GRANTED. (Cal. Ev. Code §452.)


This action for quiet title was filed on November 25, 2019. The operative Fourth Amended Complaint (“4AC”) asserts the following causes of action: (1) Unfair Competition (Viol. Of Cal. Civ. Code §17200 et seq.); (2) Violation of the Homeowners Bill of Rights (Viol. Of Cal. Civ. Code §2923.5); (3) Fraud; (4) Breach of Implied Covenant of Good Faith and Fair Dealing; (5) Unlawful Foreclosure; and (6) Negligence.


Defendants SELECT PORTFOLIO SERVICING, INC. and US BANK, NA (“Select Portfolio”) demur to each cause of action.


Second Cause of Action – HBOR Violation

Cal. Civ. Code § 2923.6 precludes a mortgage servicer from recording a notice of default, notice of sale or proceeding with a trustee’s sale while a first lien loan modification application has been submitted. Thus, § 2923.6 prohibits recording a notice of default while a modification application is still under review.


Plaintiffs allege that “The Plaintiffs had repeatedly attempted mortgage modifications with the defendants SPS on behalf of Chase through Bear Stearns and each time were never formally denied or approved of the requested modification.” (4AC ¶26) “Plaintiffs were assigned to Relationship Manager Michael Taylor from August 12, 2016 to January 13, 2018. During this period Michael Taylor received a completed loan modification application, all the Plaintiffs’ questions, and requests, and was in receipt of all requested information.” (4AC ¶31.) “The Plaintiff was never denied a loan modification in writing. [¶] The Plaintiff currently has a request for loan modification pending.” (4AC ¶¶37-38.) “Despite the fact that the Plaintiff had a pending loan modification and a pending bankruptcy the Defendant scheduled a foreclosure sale date for November 28, 2017 in violation of the law.” (4AC ¶40.) “Plaintiff brought suit for Quiet Title and Unlawful Foreclosure in 2018. [¶] As part of the Settlement Agreement with defendants, the plaintiff dismissed the Quiet Title and Unlawful foreclosure claims for fair consideration of their application for mortgage modification and $500. Following the case dismissal Plaintiff filed numerous applications for mortgage modification in April, July, and August 2018.” (4AC ¶¶41-43.) “Plaintiff vigilantly attempted to communicate with defendants. [¶] Defendant’s set a foreclosure sale date for March 2019. [¶] The illegal foreclosure sale date actually went forward, illegally selling the property.” (4AC ¶¶44-46.)


The Settlement Agreement entered into by Plaintiffs and Select Portfolio, attached as Exhibit 1 to the 4AC states, in pertinent part, “if the Agreement including the Request for Dismissal and the Stipulated Judgment of Possession, are timely and fully executed and timely provided to counsel for SPS, SPS will postpone the foreclosure sale of the Property to at least February 15, 2018. SPS will review the Loan for a possible modification on the condition that a complete modification application is submitted to SPS by December 29, 2017. Whether a modification of the Loan will be provided is solely in the discretion of SPS… and SPS… cannot be held liable for any decision on any modification application submitted.” (emphasis added) (4AC Ex. 1(3)(G).)


SPS now argues that since Plaintiffs do not sufficiently allege that a complete loan modification application was submitted prior to December 29, 2017, that SPS had no obligation to consider any complete loan modification applications submitted in 2018. This argument is well-taken.


Based on the express terms of the Settlement Agreement, Select Portfolio was not obligated to review the alleged modification applications allegedly submitted in April, July, and August 2018. (See 4AC ¶43.)


At ¶31, Plaintiffs allege that they submitted a “complete” loan modification application sometime between August 2016 to January 2018. (4AC ¶31.) This conclusory allegation is devoid of any facts. Statutory claims must be pled with specificity—Plaintiffs must specifically allege when a completed loan modification application was submitted. It does not suffice to allege that Plaintiffs submitted a completed loan modification sometime during a time period spanning over a year. As pled, the Court cannot determine whether a complete loan modification application was submitted prior to December 29, 2017.


The demurrer to the second cause of action is SUSTAINED without leave to amend.


Third Cause of Action – Fraud

The elements of a cause of action for intentional fraud are 1) misrepresentation (false representation, concealment, or nondisclosure); 2) knowledge of falsity (scienter); 3) intent to defraud or induce reliance; 4) justifiable reliance; and 5) damages. (See Cal. Civ. Code §1709.) “Fraud in the inducement is a subset of the tort of fraud. It occurs when the promisor knowns that he is signing but his consent is induced by fraud, mutual assent is present and a contract is formed, which, by reason of the fraud, is voidable.” (Hinesley v. Oakshade Town Center (2005) 135 Cal.App.4th 289, 294-295.)


Fraud actions are subject to strict requirements of particularity in pleading. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216.) Fraud must be pleaded with specificity rather than with general and conclusory allegations. (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.) The specificity requirement means a plaintiff must allege facts showing how, when, where, to whom, and by what means the representations were made, and, in the case of a corporate defendant, the plaintiff must allege the names of the persons who made the representations, their authority to speak on behalf of the corporation, to whom they spoke, what they said or wrote, and when the representation was made. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.)


Plaintiffs allege that Defendants induced Plaintiffs into entering into a Settlement Agreement in exchange for “a fair review of a loan modification and also a payment of $500.” (4AC ¶83.) Plaintiffs allege that they relied on Defendants’ misrepresentations to their detriment and would have sought legal assistance sooner or exercised other available options but for Defendants’ misrepresentations. (4AC ¶¶ 93-106.) Plaintiffs allege that they were not granted a fair review of their loan modification application(s), and that they never received the $500 promised. These allegations do not suffice. Plaintiffs fail to allege sufficient facts to constitute a cause of action for fraudulent inducement. Plaintiffs do not allege the misrepresentations with the requisite factual specificity. In addition, Plaintiffs did not allege facts showing knowledge of falsity, intent to induce reliance, and justifiable reliance.


The demurrer to the third cause of action is SUSTAINED without leave to amend.


Fourth Cause of Action – Breach of Implied Covenant of Good Faith and Fair Dealing

“The prerequisite for any action for breach of the implied covenant of good faith and fair dealing is the existence of a contractual relationship between the parties, since the covenant is an implied term in the contract.” (Smith v. San Francisco (1990) 225 Cal.App.3d 38, 49.)


Plaintiffs allege that this claim is based on the 2018 Settlement Agreement (now attached to the 4AC). The “implied covenant of good faith and fair dealing is limited to assuring compliance with the express terms of the contract, and cannot be extended to create obligations not contemplated by the contract.” (Pasadena Live, LLC v. City of Pasadena (2004) 114 Cal.App.4th 1089, 1093-1094.) 


The 4AC does not allege facts demonstrating Defendants’ refusal to discharge contractual responsibilities. As indicated above, Plaintiffs do not sufficiently allege that a complete loan modification application was submitted prior to December 29, 2017 (in satisfaction of the terms of the Settlement Agreement). Therefore, Select Portfolio was under no obligation to consider Plaintiffs’ untimely (late) loan modification applications submitted in 2018. The implied covenant claim improperly seeks to impose on Defendants’ the obligation to modify Plaintiffs’ loan. The Settlement Agreement does not require Select Portfolio to offer a loan modification.


The demurrer to the fourth cause of action is SUSTAINED with without leave to amend.


First Cause of Action – Unfair Competition

To state a claim under §17200, Plaintiffs must allege whether the conduct complained of is a fraudulent, unlawful or an unfair business practice. To bring a claim under the fraud prong, Plaintiffs must allege an affirmative misrepresentation, conduct or business practice on the part of a defendant; or an omission in violation of defendant’s duty to disclose; and that is likely to deceive members of the public. (Buller v. Sutter Health (2008) 160 Cal.App.4th 981, 986.) To state a claim under the unfairness prong, Plaintiffs must allege that one or more of Defendant’s business practices are unfair, unlawful or fraudulent; and the remedy sought is authorized by law. (Paulus v. Bob Lynch Ford, Inc. (2006) 139 Cal.App.4th 659, 676; see also Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 337.) To state a claim under the unlawful prong, Plaintiffs must allege a violation of law and cite that law. (Graham v. Bank of America, N.A. (2014) 226 Cal.App.4th 594, 610 [demurrer to SAC which failed to allege violation of a law was properly sustained without leave to amend].) 


In light of the Court’s rulings above, the demurrer to the first cause of action is SUSTAINED without leave to amend.


Fifth and Sixth Causes of Action  

“Following an order sustaining a demurrer… with leave to amend, the plaintiff may amend his or her complaint only as authorized by the court’s order.” (Harris v. Wachovia Mortgage, FSB (2010) 185 Cal.App.4th 1018, 1023.) The leave is construed as permission to the pleader to amend the causes of action to which the demurrer has been sustained, not add entirely new causes of action. (Patrick v. Alacer Corp. (2008) 167 Cal.App.4th 995, 1015; People ex. Rel. Dept. of Pub. Wks. v. Clausen (1967) 248 Cal. 2d 770, 785.).


Without leave of Court, Plaintiffs added in a fifth cause of action for Unlawful Foreclosure and a sixth cause of action for Negligence. These amendments go beyond the scope of the previous order granting leave to amend, and Plaintiffs did not seek leave to amend prior to adding these new claims. The demurrer to the fifth and sixth causes of action is SUSTAINED without leave to amend.