Judge: Peter A. Hernandez, Case: 22PSCV00444, Date: 2022-08-11 Tentative Ruling

Case Number: 22PSCV00444    Hearing Date: August 11, 2022    Dept: O

Defendants Wilmington Trust Company, As Successor Trustee to Wachovia Bank, National Association, as Trustee to Mastr Alternative Loan Trust 2004-4 Mortgage Pass-Through Certificates, Series 2004-4’s and Nationstar Mortgage LLC dba Mr. Cooper’s Demurrer to Complaint is SUSTAINED. The court will hear from counsel for Plaintiff as to whether leave to amend is requested, and as to which cause(s) of action, and will require an offer of proof if so.

Background   

Plaintiff Ibrahim H. Ghanem (“Plaintiff”) alleges as follows:

Plaintiff owns and lives in the residential real property located at 1550 S Westridge Rd., West Covina, CA 91791 (the “Property”). On or around December 9, 2003, Plaintiff entered into a loan agreement (the “Loan”) with America’s Wholesale Lender (“America’s Wholesale”), wherein America’s Wholesale agreed to loan Plaintiff $570,000.00, secured by the Property through a deed of trust (“DOT”). In or around October 18, 2019, Plaintiff experienced a financial hardship and fell behind on his mortgage payments. On or about September 20, 2021, Quality Loan Service Corporation (“QLS”), as trustee for the beneficiary, recorded a Notice of Default and Election to Sell Under Deed of Trust (“NOD”) on the Property. Plaintiff was never provided with any notice that QLS had replaced CTC Real Estate Services (“CTC”) as the trustee on the DOT. In addition, no notice of assignment of substitution of trustee for the DOT was recorded. Upon receiving the NOD, Plaintiff contacted SLS and applied for forbearance relief. SLS thereafter routinely lost documents and its representatives could not provide Plaintiff with any consistent information regarding his loan modification review.

On May 9, 2022, Plaintiff filed a complaint, asserting causes of action against Defendants Nationstar Mortgage LLC dba Wilmington and Mr. Cooper (erroneously sued as Nationstar Mortgage, LLC dba Mr. Cooper) (“Mr. Cooper”), SLS, Wilmington Trust Company, As Successor Trustee to Wachovia Bank, National Association, as Trustee to Mastr Alternative Loan Trust 2004-4 Mortgage Pass-Through Certificates, Series 2004-4 (“Wilmington”), QLS and Does 1-10 for:

1.                  Violation of Homeowner Bill of Rights

2.                  Unfair Business Practices—Bus. & Prof. Code § 17200

On June 15, 2022, QLS filed a “Declaration of Nonmonetary Status.”

A Case Management Conference is set for September 28, 2022.

Legal Standard

A demurrer may be made on the grounds that the pleading, inter alia, does not state facts sufficient to constitute a cause of action. (Code Civ. Proc., § 430.10, subd. (e).)

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.” (SKF Farms v. Superior Court (1984) 153 Cal.App.3d 902, 905 [citations omitted].) 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 placed on an instrument pleaded therein, or facts impossible in law, or allegations contrary to facts of which a court may take judicial knowledge.” (S. Shore Land Co. v. Petersen (1964) 226 Cal.App.2d 725, 732 [citations omitted].)

Discussion

Wilmington and Mr. Cooper demur, per Code of Civil Procedure § 430.10, subdivision (e), to the first and second causes of action in Plaintiff’s complaint, on the basis that they both fail to state facts sufficient to constitute causes of action.

Request for Judicial Notice

At the outset, the court rules on Wilmington’s and Mr. Cooper’s Request for Judicial Notice (“RJN”) as follows: Granted as to Exhibit A (i.e., Assignment of DOT recorded February 14, 2013) and Granted as to Exhibit B (i.e., Substitution of Trustee recorded March 4, 2020).

Joinder

On July 13, 2022, SLS filed a joinder to the demurrer. The court grants the joinder as having been timely filed.

Merits

First Cause of Action (i.e., Violation of Homeowner Bill of Rights [i.e., “HBOR”])

Plaintiff has alleged various violations of HBOR, including allegations that (1) no substitution of trustee was recorded (Complaint, ¶ 17), that (2) the requisite contacts were not made prior to recordation of the NOD (Id., ¶¶ 18-21 and 33) and that (3) dual tracking occurred when the NOD was recorded on September 20, 2021 (Id., ¶ 33.)

As to the first allegation, however, Plaintiff has failed to allege facts demonstrating a material violation of Civil Code § 2934a(1). Civil Code § 2934a provides, in relevant part, that “[t]he trustee under a trust deed . . . may be substituted by the recording in the county in which the property is located of a substitution executed and acknowledged by . . . (A) All of the beneficiaries under the trust deed, or their successors in interest . . .” Plaintiff asserts that the NOD recorded on September 20, 2021 is void because “Defendants never recorded any notice or assignment of substitution of trustee for the Deed of Trust.” (Complaint, ¶ 17.) The aforesaid allegation is contradicted by judicially noticeable documents, namely a substitution of trustee recorded against the property on March 4, 2020. (See RJN, Exh. B.) Plaintiff also complains that he “was never provided with any notice that QLS had replaced CTC as trustee on the Deed of Trust.” (Complaint, ¶ 17). However, when a substitution of trustee is recorded prior to the recording of a notice of default, such as here, there is no statutory requirement for a substitution of trustee to be provided to Plaintiff. (See Civ. Code § 2934a, subds. (b) and (c).)

As to the second allegation, Plaintiff has failed to allege that any violation of Sections 2923.55 and/or 2923.5 was material. Civil Code § 2924.12 provides that “[i]f a trustee's deed upon sale has not been recorded, a borrower may bring an action for injunctive relief to enjoin a material violation of Section 2923.55. . .” Civil Code § 2924.19 provides that “[i]f a trustee’s deed upon sale has not been recorded, a borrower may bring an action for injunctive relief to enjoin a material violation of Section 2923.5 . . .” Here, Plaintiff has failed to allege any facts that indicate that the claimed lack of contact prior to the recordation of the NOD in any way caused him to be unable to seek foreclosure prevention alternatives. In fact, Plaintiff has alleged that “[u]pon receiving the Notice of Default, [he] contacted SLS regarding the Loan and his options to avoid foreclosure” and that “[a]fter discussing the matter with SLS’ authorized representative, [he] applied for forbearance relief.” (Complaint, ¶ 22.)

As to the third allegation, Plaintiff has failed to allege that any violation of Section 2923.6 was material under Section 2924.12. Further, Section 2923.6, subsection (c) provides, in relevant part, that “[i]f a borrower submits a complete application for a first lien loan modification offered by, or through, the borrower's mortgage servicer at least five business days before a scheduled foreclosure sale, a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of default or notice of sale, or conduct a trustee's sale, while the complete first lien loan modification application is pending. . .” Plaintiff has alleged that “Defendants persisted in dual tracking the loan modification review and non-judicial foreclosure proceedings.” (Complaint, ¶ 33.) Plaintiff, however, has only generically alleged that he “applied for forbearance relief” and that he “would continue to follow up with his loan modification review.” (Id., ¶¶ 22 and 23.) Plaintiff’s allegations regarding dual tracking appear directed towards SLS and not demurring defendants. At any rate, Plaintiff has not alleged that he ever submitted a “complete application for a first lien loan modification.”

Wilmington’s and Mr. Cooper’s demurrer to the first cause of action is sustained.

Second Cause of Action (i.e., Unfair Business Practices—Bus. & Prof. Code § 17200)

Wilmington and Mr. Cooper assert that Plaintiff lacks standing. The court determines that this assertion is well-taken. “A private plaintiff [pursuing a UCL cause of action] must make a twofold showing: he or she must demonstrate injury in fact and a loss of money or property caused by unfair competition.” (Peterson v. Celico Partnership (2008) 164 Cal.App.4^th 1583, 1590 [emphasis in original].) Plaintiff has alleged that “Defendants have harmed [him] by proceeding with the non-judicial foreclosure process against [him] while [he] was being reviewed for a loan modification.” (Complaint, ¶ 41.) Plaintiff has not identified any loss of money or property.

Further, the elements required to state a cause of action for violation of Business & Professions Code section 17200 are (1) a business practice, (2) that is unfair, unlawful or fraudulent, and (3) an authorized remedy. (Business and Professions Code § 17200). Section 17200's “unlawful” prong “borrows violations of other laws ... and makes those unlawful practices actionable under the UCL.”  (Klein v. Chevron U.S.A., Inc. (2012) 202 Cal.App.4th 1342, 1383.)  “A business practice is “fraudulent” within the meaning of section 17200 if it is “likely to deceive the public.”  (Id. at 1380.) A business practice is “unfair” within the meaning of the UCL if it violates established public policy or if it is immoral, unethical, oppressive or unscrupulous and causes injury to consumers which outweighs its benefits.  (Nolte v. Cedars-Sinai Medical Center (2015) 236 Cal.App.4th 1401, 1407–1408.) “When a statutory claim fails, a derivative UCL claim also fails.” (Aleksick v. 7-Eleven, Inc. (2012) 205 Cal.App.4^th 1176, 1185.)

Plaintiff’s claim, to the extent it is predicated on unlawful business practices, also fails because it is derivative of failed statutory claims. Plaintiff has not otherwise alleged any facts that Wilmington and Mr. Cooper engaged in a business act or practice that was unlawful, fraudulent or unfair.

Wilmington’s and Mr. Cooper’s demurrer to the second cause of action is sustained.