Judge: Olivia Rosales, Case: 21NWCV00590, Date: 2022-09-15 Tentative Ruling
Case Number: 21NWCV00590 Hearing Date: September 15, 2022 Dept: SEC
GARCIA v. FRANKLIN
CREDIT MANAGEMENT CORPORATION
CASE NO.: 21NWCV00590
HEARING: 09/15/22
JUDGE: JOHN A.
TORRIBIO
#7
TENTATIVE ORDER
I.
Defendant FRANKLIN CREDIT MANAGEMENT
CORPORATION’s Demurrer to Plaintiff’s Third Amended Complaint is SUSTAINED without
further leave to amend in part and OVERRULED in part.
II.
Defendant FRANKLIN CREDIT MANAGEMENT
CORPORATION’s Motion to Strike Portions of Plaintiff’s Third Amended Complaint
is GRANTED without leave to amend.
Moving Party to give Notice.
Defendant’s Request for Judicial Notice is GRANTED. Cal. Ev.
Code §452.
This wrongful foreclosure action was filed by Plaintiff
JESUS GARCIA on September 9, 2021. On July 29, 2022, the operative Third
Amended Complaint (“TAC”) was filed.
The relevant facts, as alleged, are as follows: “Plaintiff
brings this Complaint based on Defendant’s severe mishandling of payments that
Plaintiff has made on the loan. In fact, Plaintiff has been making payments on
the loan since, at least, March 2020, and, despite that fact, since that time,
Plaintiff’s arrears have grown, rather than decrease, by over $40,000.00 when
Plaintiff’s payments were only $1,225.76. Thus, it is a statistical
impossibility, that Plaintiff’s arrears could have grown by over $40,000.00 in
seventeen (17) months even if Plaintiff were not making payments, which he was.
Furthermore, despite the fact that Plaintiff has been making payments,
Defendant has initiated foreclosure proceedings on Plaintiff’s loan.” (TAC ¶1.)
Plaintiff’s TAC asserts the following causes of action: (1) Violation
of the Fair Debt Collection Practices Act; (2) Breach of Contract; (3)
Violation of Cal. Civ. Code §2924c(d); and (4) Unfair Bus. Practices.
Defendant FRANKLIN CREDIT MANAGEMENT CORPORATION (“Defendant”)
specially and generally demurs to the first, third, and fourth causes of
action.
Sham Pleading
The “sham pleading doctrine”
provides that “[i]f a party files an amended complaint and attempts to avoid
the defects of the original complaint by either omitting facts which made
the previous complaint defective or by adding facts inconsistent with those of
previous pleadings, the court may take judicial notice of prior pleadings and
may disregard any inconsistent allegations.” (emphasis added.) (Colapinto v.
County of Riverside (1991) 230 Cal.App.3d 147, 151-152.) Plaintiffs can
only “avoid the effect of the sham pleading doctrine by alleging an explanation
for the conflicts between the pleadings. [Citation.]. (Deveny v. Entropin,
Inc. (2006) 139 Cal.App.4th 408, 426.) While the sham pleading rule “is a good rule
to defeat abuses of the privilege to amend and to discourage sham and
untruthful pleadings” … "[i]t is not a rule…which is intended to prevent
honest complainants from correcting erroneous allegations…or to prevent
correction of ambiguous facts.” (Avalon Painting Co. v. Alert Lumber Co.
(1965) 234 Cal.App.2d 178, 185.)
The demurrer is not sustained under the sham pleading doctrine. In its’ July
14, 2022 Order, this Court expressly granted Plaintiff leave to amend his
claims and allege additional facts. This Court does not find the added facts to
be inconsistent with the prior pleadings.
First Cause of Action – Violation of the Fair Debt
Collection Practices Act and
Plaintiff alleges that Defendant has violated Cal. Civ. Code
§1788.13(e), in violation of the Fair Debt Collection Practices Act: “From
December 2017 to March 2020, Defendant added nearly $14,000 in ‘foreclosure
attorney fees’ to the arrears owed on the loan. Pursuant to Cal. Civ. Code
§2924c(d), the foreclosure attorney’s fees for a loan with an unpaid principal
balance of less than $150,000.00 may not exceed $300.00. As such, Defendant
attempted to collect and collected a consumer debt by making the false
representation that Plaintiff’s debt may be increased by the addition of attorney’s
fees that could not have been legally added to the existing obligation, in
violation of the FDCPA.” (TAC ¶25.)
Cal. Civ. Code §1788.13(e) states that “[n]o debt collector
shall collect or attempt to collect a consumer debt by… (e) The false
representation that the consumer debt may be increased by the addition of
attorney’s fees… if, in fact, such fees or charges may not legally be added to
the existing obligation.” (Id.) This “provision prohibits debt collectors from
making false representations that ‘the consumer debt may be increased’ by the
addition of fees ‘if, in fact, such fees or charges may not legally be added to
the existing obligation.’” (Lembeck v. Arvest Central Mortgage Co.
(2020) 498 F.Supp.3d 1134, 1137.)
Here, Plaintiff does not allege that Defendant made a
misrepresentation that Plaintiff’s debt would be increased by the addition of
attorney’s fees to the principal loan amount, in an attempt to collect on
Plaintiff’s debt. Statutory claims must be pled with specificity. (Fisher v. San Pedro Peninsula
Hospital (1989) 214 Cal.App.3d 590, 604.) Despite having had
multiple opportunities to do so, Plaintiff still fails to allege what
misrepresentation was made, where, when, by whom, and how. The demurrer to the
first cause of action is SUSTAINED without further leave to amend.
Third Cause of Action – Violation of Cal. Civ. Code
§2924c(d)(1)
Cal. Civ. Code §2924c establishes the rights and obligations
of mortgagors and mortgagees with respect to curing a default on a loan,
reinstatement, and the suspension of foreclosure proceedings through, among
other things, the rescission of notices.
Plaintiff alleges that Defendant violated Civil Code §2924
by charging reinstatement funds that included illegal attorney’s fees,
resulting in a reinstatement amount well over than the amount necessary to
reinstate the loan.
In the TAC, Plaintiff alleges that he attempted to reinstate
the loan in August 2021 by paying the “outstanding amounts actually owed, but
his offer of tender was rejected as insufficient.” (TAC ¶47.) Plaintiff further
alleges that he paid $239,866.06 on September 29, 2021 to reinstate the loan. (TAC
¶¶20, 53.)
The demurrer is OVERRULED. Plaintiff is not foreclosed from
his ability to reinstate the loan. (See Cal. Civ. Code §2924c(e).) Moreover,
Plaintiff adequately alleges that Defendant violated Civil Code 2924c(d) by
adding “nearly $14,000 in ‘foreclosure attorney fees’ to the arrears owed to
the loan.” (See TAC ¶¶25, 27.)
The arguments raised by Defendant in the Demurrer raise
factual determinations inappropriately decided at this stage in the litigation.
Plaintiff’s allegations are sufficient for purposes of surviving demurrer.
Fourth Cause of Action – Viol. of B&P §17200
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].)
Plaintiff
might have had a sufficient basis to maintain a claim for unfair business
practices given the Court’s ruling as to the third cause of action. However,
the demurrer to the fourth cause of action is SUSTAINED without leave to amend
because Plaintiff fails to allege standing under the UCL.
In Jenkins v. JP
Morgan Chase Bank, N.A., (2013) 216 Cal.App.4th 497, the court held that a
plaintiff does not have standing to bring a UCL claim when they admit to being
in default on the loan. (Id. at 521-523.) Jenkins further held
that any alleged wrongful conduct in the foreclosure process after the
borrower’s default did not cause the borrower’s injury, rather, the injury was caused
by the default itself. (Id.) Because any misconduct that occurred after
the default did not cause the injury, no causation was present, and the
plaintiff lacked standing to sue under the UCL. (Id.) Since the
plaintiff did not satisfy the standing requirements, the claim was properly
dismissed without leave to amend. (Id.)
Here, Plaintiff admits
throughout the TAC that he was in default, and that the foreclosure proceedings
were triggered by his default—not any act of the Defendant. (TAC ¶9.) Accordingly,
similar to the plaintiff in Jenkins, Plaintiff lacks standing to bring a
UCL claim where Plaintiff does not allege that he suffered any actual damages
as a result of Defendant’s conduct. Further, Plaintiff cannot demonstrate lost
property because the Property has not been foreclosed upon.
Motion
to Strike
Defendant
moves to strike Plaintiff’s request for injunctive relief.
This
Court has already determined that that Plaintiff’s request for injunctive
relief should be stricken without leave to amend. Notwithstanding, Plaintiff
has not omitted the previously stricken verbiage. The unopposed Motion is
GRANTED.