Judge Ralph C. Hofer, Case Number: 23GDCV00565, Date: 2023-09-08 Tentative Ruling

Plaintiff Ariel Obregon alleges that plaintiff was the owner of real property in Glendale, which is subject to a mortgage loan, and that defendants Select Portfolio Servicing, the purported current loan servicer of the mortgage loan, and defendant US Bank National Association, successor Trustee to LaSalle Bank N.A., on behalf of the Holders of Bear Stearns Asset Back Securities 1 Trust (US Bank), the purported current beneficiary of the mortgage loan, improperly recorded a Notice of Default and a Notice of Trustee’s Sale.

The complaint alleges that defendants failed to notify the homeowner about possible foreclosure and wait thirty days after notice to record a NOD, failed to rescind foreclosure efforts after a request for a loan modification was made, failed to assign a single point of contact, failed to provide plaintiff with foreclosure alternatives, and failed to provide plaintiff with written notice of the receipt of a loan modification application.

“The parties may stipulate without leave of court to one 15-day extension beyond the 30-day time period prescribed for the response after service of the initial complaint.”

Here, the complaint was served on the moving parties by personal service on March 23, 2023. Thirty days from this date was April 22, 2023, a Saturday, so a demurrer was due no later than the following Monday, April 24, 2023. The demurrer was served and filed on July 24, 2023, three months late, and well beyond the 15 days the parties were permitted to stipulate without leave of court for an extension to plead. The Court considered whether the demurrer would be overruled as extremely untimely, but the Court elects not to do so.

Here, the opposition was served and filed on August 31, 2023, for a September 8, 2023 hearing, only five court days prior to the hearing. This filing a full four court days late, and just one court day before timely reply would have been due. In addition, the opposition was served by mail, just two court days prior to a three-day holiday weekend, making it unlikely the opposition was received in time to file a reply at any reasonable time prior to the hearing. Not surprisingly, no timely reply has been filed to the opposition as of two court days prior to the hearing. The court, in its discretion could refuse to consider the untimely opposition, but the Court elects not to do so.

“(a)(1) A mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of default pursuant to Section 2924 until both of the following:

(A) Either 30 days after initial contact is made as required by paragraph (2) or 30 days after satisfying the due diligence requirements as described in subdivision (e)….

(2) A mortgage servicer shall contact the borrower in person or by telephone in order to assess the borrower's financial situation and explore options for the borrower to avoid foreclosure. During the initial contact, the mortgage servicer shall advise the borrower that he or she has the right to request a subsequent meeting and, if requested, the mortgage servicer shall schedule the meeting to occur within 14 days. The assessment of the borrower's financial situation and discussion of options may occur during the first contact, or at the subsequent meeting scheduled for that purpose. In either case, the borrower shall be provided the toll-free telephone number made available by the United States Department of Housing and Urban Development (HUD) to find a HUD-certified housing counseling agency. Any meeting may occur telephonically.”

The complaint alleges that defendants recorded a Notice of Default without contacting plaintiff, although plaintiff was staying in his home at the time and received no mail or messages. [Complaint, paras. 23, 24].

The demurrer appears to address this cause of action by mistakenly referring to the claim as one based on Civil Code section 2924.5 (a)(2), not 2923.5. [See Demurrer, pp. 2-3]. In any case, defendants have failed to show how the claim is not sufficiently stated. The opposition points out that the 30-day notice requirement remains a continuing requirement under the current version of the Homeowner’s Bill of Rights. The demurrer is overruled.

Plaintiff in the opposition states, “Plaintiff will cease to pursue the second cause of action for violation of Cal. Civ. Code Section 2924 (a)(1).” [Opposition, p. 2:11-12]. The demurrer to this cause of action accordingly is sustained without leave to amend at the concession of plaintiff in the opposition.

“(c) If 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. 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 until any of the following occurs:

(1) The mortgage servicer makes a written determination that the borrower is not eligible for a first lien loan modification, and any appeal period pursuant to subdivision (d) has expired.

(3) The borrower accepts a written first lien loan modification, but defaults on, or otherwise breaches the borrower's obligations under, the first lien loan modification.”

Plaintiff alleges that on February 27, 2023, plaintiff submitted a complete request for mortgage assistance to defendants through his agent, that the NOD had been recorded on July 22, 2022, and that a NOTS had been recorded on January 24, 2023. [Complaint, para. 36-38]. The cause of action then sets forth the statute, and alleges that defendants violated the statute, by “failing to rescind all foreclosure efforts against Plaintiff, including the recording of a Notice of Default or Notice of Trustee’s Sale.” [Comp., para. 41].

Defendant argues that the statute does not require rescission of any foreclosure related document, which is true. The demurrer is sustained on the ground rescission is not required under the statute. Defendant also points out that there is no allegation that defendants recorded those documents or conducted a trustee’s sale after plaintiff submitted a complete loan modification application. The statute prohibits recording the documents, or for defendants to “conduct a trustee’s sale,” while the application is pending. There is no allegation that defendants in fact conducted a trustee’s sale after the application was submitted. The demurrer is sustained on this ground, with leave to amend, if possible.

The opposition seems to suggest that plaintiff was entitled to a loan modification review because there had been a material change in plaintiff’s financial circumstances since the date of a previous application, pursuant to subdivision (g). This circumstance is not alleged in the cause of action, however, and no mention is made of this subdivision. [Comp., para. 39].

“(a) When a borrower requests a foreclosure prevention alternative, the mortgage servicer shall promptly establish a single point of contact and provide to the borrower one or more direct means of communication with the single point of contact.

(1) Communicating the process by which a borrower may apply for an available foreclosure prevention alternative and the deadline for any required submissions to be considered for these options.

(2) Coordinating receipt of all documents associated with available foreclosure prevention alternatives and notifying the borrower of any missing documents necessary to complete the application.

(3) Having access to current information and personnel sufficient to timely, accurately, and adequately inform the borrower of the current status of the foreclosure prevention alternative.

(c) The single point of contact shall remain assigned to the borrower's account until the mortgage servicer determines that all loss mitigation options offered by, or through, the mortgage servicer have been exhausted or the borrower's account becomes current.

(d) The mortgage servicer shall ensure that a single point of contact refers and transfers a borrower to an appropriate supervisor upon request of the borrower if the single point of contact has a supervisor.

(e) For purposes of this section, “single point of contact” means an individual or team of personnel each of whom has the ability and authority to perform the responsibilities described in subdivisions (b) to (d), inclusive. The mortgage servicer shall ensure that each member of the team is knowledgeable about the borrower's situation and current status in the alternatives to foreclosure process.”

The complaint alleges that plaintiff submitted a complete request for mortgage assistance, “and requested a single point of contact,” but that defendants failed to assign a SPOC within a reasonable time. [Comp., paras. 43, 44]. This allegation is sufficient to allege a violation.

Defendant argues that the complaint alleges elsewhere that plaintiff was able to communicate with specific points of contact at defendants regarding the status of his loan application. The allegations cited refer to statements from defendants after inquiry by plaintiff’s representative, and do not contradict the allegation that no single point of contact was ever assigned. [Comp., paras. 18, 19, 64 (c)]. The demurrer accordingly is overruled.

“(a) Unless a borrower has previously exhausted the first lien loan modification process offered by, or through, his or her mortgage servicer described in Section 2923.6, within five business days after recording a notice of default pursuant to Section 2924, a mortgage servicer that offers one or more foreclosure prevention alternatives shall send a written communication to the borrower that includes all of the following information:

The complaint alleges that the NOD was recorded on July 19, 2022, but plaintiff received no mail or messages, and defendants failed to notify plaintiff of all foreclosure prevention alternatives within 5 business days of the recording of the NOD, as required under the statute, and that if plaintiff had received such contact, he would have taken action to avoid the foreclosure of the property. [Comp., paras. 51, 52].

Defendant argues that this cause of action is insufficiently stated because plaintiff’s allegations establish that he subsequently submitted a loan modification allegation, and spoke with defendants regarding that application, demonstrating that any violation was either cured or not material. This conclusion is not evident from the pleading, however. Plaintiff in the opposition points out that the statute requires the contact within a specific time period, and it is clearly alleged that the contact did not occur within the time period. This compliance with the statute could have permitted a more prompt response on the part of plaintiff. The demurrer to this cause of action is overruled.

“(a) When a borrower submits a complete first lien modification application or any document in connection with a first lien modification application, the mortgage servicer shall provide written acknowledgment of the receipt of the documentation within five business days of receipt. In its initial acknowledgment of receipt of the loan modification application, the mortgage servicer shall include the following information:

(1) A description of the loan modification process, including an estimate of when a decision on the loan modification will be made after a complete application has been submitted by the borrower and the length of time the borrower will have to consider an offer of a loan modification or other foreclosure prevention alternative.

(b) For purposes of this section, a borrower's first lien loan modification application shall be deemed to be “complete” when a borrower has supplied the mortgage servicer with all documents required by the mortgage servicer within the reasonable timeframes specified by the mortgage servicer.”

The complaint alleges that plaintiff submitted his complete request, and defendants failed to provide the written notice to plaintiff of receipt of the loan modification application within 5 business days of receipt. [Comp., paras. 54, 55].

Defendant again argues that plaintiff has made allegations that after submission of his application he was able to communicate with defendants’ representatives regarding the status of his application, but these allegations do not contradict the allegation that the prompt written notice was not provided as required under the statute, and there are no allegations that a modification was approved or denied, or that all notice requirements were satisfied throughout the process. The demurrer accordingly is overruled to this cause of action.

The demurrer argues that the cause of action is derivative and cannot be used as an end-run around the requirements of other statutes. The argument appears to be that since the previous causes of action for HBOR violations have not been sufficiently alleged, no unlawful business practice has been alleged. The complaint alleges that defendant purposefully violated the statutes set forth above and describes that offending conduct. [Complaint, para. 64].

“A written instrument, in respect to which there is a reasonable apprehension that if left outstanding it may cause serious injury to a person against whom it is void or voidable, may, upon his application, be so adjudged, and ordered to be delivered up or cancelled.”

Ordinarily, to state a claim for cancellation of a written instrument, a plaintiff must allege facts showing that the instrument was procured by fraud, accident or mistake. Hironymous v. Hiatt (1921) 52 Cal.App. 727, 731 (disapproved on other grounds in Robertson v. Superior Court (2001) 90 Cal.App.4th 1319).

The cause of action is very brief, alleging that plaintiff has a reasonable belief that the NOD and NOTS “are voidable or void ab initio,” and if left outstanding may cause serious injury to plaintiff because of defendants’ violations of various listed sections of the HBOR. [Comp., paras. 73, 74].

Defendant argues here that plaintiff must plead specific facts, not mere conclusions, showing the apparent invalidity of the instrument designated, and point out the reasons for asserting that it is actually invalid. Defendant relies on Wolfe v. Lipsy (1985) 163 Cal.App.3d 633, 638 (disapproved on other grounds, Droeger v. Friedman, Sloan & Ross (1991) 54 Cal.3d 26, 35-36) in which the Second District noted:

“[A]n action to remove a cloud on title, under Civil Code section 3412, is aimed at a particular instrument, or piece of evidence. ( Ephraim v. Metropolitan Trust Co. (1946) 28 Cal.2d 824, 833 [172 P.2d 501].) To state a cause of action to remove a cloud, instead of pleading in general terms that the defendant claims an adverse interest, the plaintiff must allege, inter alia, facts showing actual invalidity of the apparently valid instrument or piece of evidence. (3 Witkin, Cal. Procedure (2d ed. 1971) Pleading, § 537-538, pp. 2184-2185.)”

To the extent the argument is that the notices were recorded in violation of the HBOR, the statute expressly indicates that the remedies for such violations are limited, specifically with respect to remedies available to a borrower prior to and after the recordation of a trustee’s deed upon sale, and do not include, for example, setting aside a completed sale to a bona fide purchaser. Civil Code § 2924.12 provides, in pertinent part:

“(a)(1) If 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, 2923.6, 2923.7, 2924.9, 2924.10, 2924.11, or 2924.17.

(2) Any injunction shall remain in place and any trustee's sale shall be enjoined until the court determines that the mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent has corrected and remedied the violation or violations giving rise to the action for injunctive relief. An enjoined entity may move to dissolve an injunction based on a showing that the material violation has been corrected and remedied.

(b) 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 pursuant to Section 3281, resulting from a material violation of Section 2923.55, 2923.6, 2923.7, 2924.9, 2924.10, 2924.11, or 2924.17 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. If the court finds that the material violation was intentional or reckless, or resulted from willful misconduct by a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent, the court may award the borrower the greater of treble actual damages or statutory damages of fifty thousand dollars ($50,000).

(c) A mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not be liable for any violation that it has corrected and remedied prior to the recordation of the trustee's deed upon sale, or that has been corrected and remedied by third parties working on its behalf prior to the recordation of the trustee's deed upon sale….

The demurrer to this cause of action accordingly is sustained. As the opposition does not specify what facts could be alleged to support such a cause of action under the circumstances, and it is ordinarily plaintiff’s burden to specify such facts which could be made on amendment, which the plaintiff has not done. This cause of action is sustained without leave to amend.

The Court notes that the demurrer is extremely untimely, filed and served three months late. Counsel for defendants is cautioned that in the future the Court may refuse to consider pleadings not filed in conformity with the statutes, rules and procedures governing this litigation.

The Court also notes that the opposition filed by plaintiff was also very untimely, filed four court days late, just one court day prior to the due date for reply, and served by mail four court days late, without reasonably assuring it would reach the moving party the following business day, which also would have permitted insufficient time to reasonably prepare and file and serve a reply in time to be considered by the Court. Plaintiff’s counsel is also cautioned that in the future the Court may refuse to consider pleadings not filed in conformity with the statutes, rules and procedures governing this litigation.

Demurrer is OVERRULED to the second cause of action for Violation of Civil Code section 2924 (a)(1), at the concession of plaintiff in the opposition that plaintiff “will cease to pursue the second cause of action for violation of Cal. Civ. Code Section 2924 (a)(1).”

Demurrer is OVERRULED to the first cause of action for Violation of Civil Code section 2923.5, fourth cause of action for Violation of Civil Code section 2923.7, fifth cause of action for Violation of Civil Code section 2924.9, sixth cause of action for Violation of Civil Code section 2924.10, and seventh cause of action for Unfair Business Practices.

Demurrer to the third cause of action for Violation of Civil Code section 2923.6 (c) is SUSTAINED WITH LEAVE TO AMEND on the ground the statute does not require rescission of any foreclosure related document, and there is no allegation that defendants recorded documents or conducted a trustee’s sale after plaintiff submitted a complete loan modification application.

Demurrer to the eighth cause of action for Cancellation of Instruments is SUSTAINED WITHOUT LEAVE TO AMEND on the ground the cause of action fails to allege with sufficient specificity the facts which would support a finding that each subject instrument is void or voidable, particularly when the remedies for the HBOR statutory violations are expressly limited.

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