Judge: Ronald F. Frank, Case: 23TRCV00297, Date: 2023-05-03 Tentative Ruling

Case Number: 23TRCV00297    Hearing Date: May 3, 2023    Dept: 8

Tentative Ruling¿¿ 

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HEARING DATE:                 May 3, 2023

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CASE NUMBER:                  23TRCV00297

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CASE NAME:                        Jennifer Bruccolieri v. Fay Servicing, LLC, et al

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MOVING PARTY:                Defendants, Fay Servicing, LLC; and US Bank Trust National Association, Not in its individual capacity but solely as owner trustee for VRMTG Asset Trust, erroneously sued as “U.S. Bank Trust N.A., as owner Trstee for VRMTG Asset Trust.

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RESPONDING PARTY:       Plaintiff, Erica H. Leventhal

TRIAL DATE:                        None Set.

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MOTION:¿                              Demurrer 

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Tentative Rulings:                  SUSTAIN on standing grounds since the borrower per the RFJN is a different person than the named Plaintiff here and the Complaint does not allege successor in interest, conveyance, or other way in which the named Plaintiff rather than Sue Bruccolieri is the proper plaintiff. Points of potential argument as to specific causes of action and whether leave to amend should be granted are detailed below.

I. BACKGROUND¿¿¿ 

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A. Factual¿¿¿ 

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            On February 2, 2023, Plaintiff, Jennifer Bruccolieri (“Plaintiff”) filed a Complaint against Defendants Fay Servicing, LLC, U.S. Bank Trust National Association, not in its individual capacity, but solely as owner trustee for VRMTG Asset Trust, erroneously sued as “U.S. Bank Trust N.A., as Owner Trustee for VRMTG Asset Trust. The Complaint alleges Causes of Action for: (1) Violation of Civil Code § 2923.5; (2) Violation of Civil Code § 2924(a)(1); (3) Violation of Civil Code § 2924.9; (4) Violation of the Truth in Lending Act, Title 12 CFR § 1024.35; (5) Violation of the Truth in Lending Act, Title 12 CFR § 1024.38; (6) Negligence; (7) Wrongful Foreclosure; (8) Unfair Business Practices, Violation of Business & Professions Code § 17200, et seq.; and (9) Cancellation of Written Instrument, Civil Code § 3412.

            Plaintiff brought this action as a result of the alleged substandard foreclosure proceedings relating to the real property that she owned located at 18920 Haas Avenue, Torrance, California 90504.   Defendants now demur to all causes of action.

B. Procedural¿¿¿ 

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            On March 3, 2023, Defendants filed a Demurrer and a request for judicial notice regarding documents contained in the County Recorder’s office as to the subject property. On  April 20, 2023, Plaintiff filed an opposition.   On Aril 24, 2023, Defendants filed a reply brief.

II. REQUEST FOR JUDICIAL NOTICE

            Defendants requested this Court take Judicial Notice of the following documents:

1. Deed of Trust recorded on July 21, 2003, in the Los Angeles County Recorder’s Office bearing Instrument No. 03 2066729, a true and correct copy of which is attached hereto as Exhibit A.

2. Corporate Assignment of Deed of Trust recorded on October 10, 2012, in the Los Angeles County Recorder’s Office bearing Instrument No. 20121527204, a true and correct copy of which is attached hereto as Exhibit B.

3. Assignment of Deed of Trust recorded on July 6, 2022, in the Los Angeles County Recorder’s Office bearing Instrument No. 20220601558, a true and correct copy of which is attached hereto as Exhibit C.

4. Substitution of Trustee recorded on April 15, 2016, in the Los Angeles County Recorder’s Office bearing Instrument No. 20160422324, a true and correct copy of which is attached hereto as Exhibit D.

5. Notice of Default recorded on July 20, 2017, in the Los Angeles County Recorder’s Office bearing Instrument No. 20170811627, a true and correct copy of which is attached hereto as Exhibit E.

6. Notice of Trustee Sale recorded on December 14, 2022, in the Los Angeles County Recorder’s Office bearing Instrument No. 20221165303, a true and correct copy of which is attached hereto as Exhibit F.

The Court GRANTS Defendants’ request and takes judicial notice of the above.  The Court notes that the Complaint attaches the Deed of Trust as Exhibit A and the borrower identified in the Deed of Trust (M. Sue Bruccolieri) has a different name than the Plaintiff in this lawsuit, which is the point of the first item to be judicially noticed as well.    

III. ANALYSIS¿¿ 

A.    Legal Standard

A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “To survive a demurrer, the complaint need only allege facts sufficient to state a cause of action; each evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged.” (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.) For the purpose of testing the sufficiency of the cause of action, the demurrer admits the truth of all material facts properly pleaded. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967.) A demurrer “does not admit contentions, deductions or conclusions of fact or law.” (Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713.)¿¿¿¿ 

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A pleading is uncertain if it is ambiguous or unintelligible. (Code Civ. Proc., § 430.10, subd. (f).) A demurrer for uncertainty may lie if the failure to label the parties and claims renders the complaint so confusing defendant cannot tell what he or she is supposed to respond to.¿ (Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139, fn. 2.) However, “[a] demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.” (Khoury v. Maly's of California, Inc. (1993) 14 Cal.App.4th 612, 616.)¿¿¿ 

B.     Discussion

Violation of Civil Code § 2923.5

Standing

Defendants first argue that the First Cause of Action for Violation of Civil Code § 2923.5 fails because it lacks facts upon which relief can be granted. Defendants argue that this is because Plaintiff lacks standing to sue under California Homeowner Bill of Rights (“HBOR”) because Plaintiff is not a “borrower”. Under Civil Code § 2920.5(c)(1), a “borrower” is any natural person who is a mortgagor or trustor and who is potentially eligible for any federal, state, or proprietary foreclosure prevention alternative program offered by, or through, his or her mortgage servicer. Defendant argues that Plaintiff is not the borrower with respect to the Loan n. (See Deed of Trust, attached to RJN as Exhibit “A”). For this reason, Defendants argue that Plaintiff lacks standing to invoke either Civil Code §§2923.5 or 2924.9 of HBOR.

In opposition, Plaintiff argues that she has standing under the UCL because she has a present or future property interest that has been diminished. Plaintiff argues that she has been wrongfully deprived of a proper and diligent loan modification review and in the process incurred late & interest fees as a result of the prolonged review and has had to endure the expenses of the instant litigation as a result of Defendant, Fay Servicing’s failure to properly review Plaintiff’s loan modification application. Plaintiff argues that such expenditures provide her with standing under the UCL. The Opposition also argues at page 1 lines 1-19 and page 3 line 11 that she notified the servicer of the loan that she is a successor in interest and thus the rightful owner of the property, and on page 1 lines 24-28 that a successor in interest to the borrower /trustor / mortgagor has standing to bring the causes of action alleged in the Complaint.  However, the Complaint does not make any allegation of successor in interest or of notification to the loan servicer of her status as successor in interest.

In their reply brief, Defendants note that for the first time, Plaintiff suggest in the opposition that she may be prosecuting her purported HBOR causes of action as a survivor or heir pursuant to Civil Code §2929.5. As noted by Defendants a demurrer tests the sufficiency of the Complaint. On numerous occasions, Plaintiff refers to herself as the “Borrower” on numerous occasions and attaches exhibits as reference. However, the Exhibits lists “M. Sue Bruccolieri as the “Grantor/Trustor/Mortgagor” and/or as the “Borrower.” As such, based on the Complaint alone, plus the Deed of Trust of which the Court takes judicial notice, Plaintiff does not have standing as a Borrower as the suit is currently alleged.  .

Cause of Action

            If Plaintiff did have standing as a Borrower, Defendants still argue that she has not alleged sufficient facts to state a Cause of Action for Violation of Civil Code § 2923.5. Pursuant to Civil Code § 2923.5, a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent is required to either contact the borrower prior to initiating a foreclosure sale in order to assess and explore the borrower’s options for avoiding foreclosure or exercise due diligence in attempting to so contact the borrower.  Defendants argue that Plaintiff reasons the Defendants must have violated Civil Code §2923.5 since “Plaintiffs received no mail or messages” from them. (Complaint, ¶ 23). However, Defendants assert that Plaintiff’s allegation says nothing as to whether Defendants actually exercised due diligence in attempting to reach Plaintiff. Defendants argue this is particularly relevant given that Defendants’ claim their efforts under the statute were geared towards contacting Borrower, not Plaintiff.

            In opposition, Plaintiff asserts that Fay Servicing recorded a Notice of Default on July 20, 2017, and regardless of Defendants’ declaration that they attempted contact, none was made. Plaintiff does not address Defendants’ argument that contact was attempted between Defendants and the listed “borrower,” Sue Bruccolieri. The Court’s view is that all of these matters of due diligence and actual attempts to contact Sue as opposed to Jennifer are outside the four corners of the Complaint and therefore improper subjects for Demurrer.   

Violation of Civil Code § 2924(a)(1)

            Defendants also argue that Plaintiff has failed to sufficiently allege a cause of action for Violation of Civil Code § 2924(a)(1). Pursuant to Civil Code § 2924(a)(1):

Every transfer of an interest in property, other than in trust, made only as a security for the performance of another act, is to be deemed a mortgage, except when in the case of personal property it is accompanied by actual change of possession, in which case it is to be deemed a pledge. If, by a mortgage created after July 27, 1917, of any estate in real property, other than an estate at will or for years, less than two, or in any transfer in trust made after July 27, 1917, of a like estate to secure the performance of an obligation, a power of sale is conferred upon the mortgagee, trustee, or any other person, to be exercised after a breach of the obligation for which that mortgage or transfer is a security, the power shall not be exercised except where the mortgage or transfer is made pursuant to an order, judgment, or decree of a court of record, or to secure the payment of bonds or other evidences of indebtedness authorized or permitted to be issued by the Commissioner of Financial Protection and Innovation, or is made by a public utility subject to the provisions of the Public Utilities Act, until all of the following apply:

(1) The trustee, mortgagee, or beneficiary, or any of their authorized agents shall first file for record, in the office of the recorder of each county wherein the mortgaged or trust property or some part or parcel thereof is situated, a notice of default. That notice of default shall include all of the following:

(A) A statement identifying the mortgage or deed of trust by stating the name or names of the trustor or trustors and giving the book and page, or instrument number, if applicable, where the mortgage or deed of trust is recorded or a description of the mortgaged or trust property.

(B) A statement that a breach of the obligation for which the mortgage or transfer in trust is security has occurred.

(C) A statement setting forth the nature of each breach actually known to the beneficiary and of the beneficiary’s election to sell or cause to be sold the property to satisfy that obligation and any other obligation secured by the deed of trust or mortgage that is in default.

(D) If the default is curable pursuant to Section 2924c, the statement specified in paragraph (1) of subdivision (b) of Section 2924c.

            Here, Plaintiff’s Complaint alleges that on July 20, 2017, Defendants recorded a Notice of Default on the Subject Property. Plaintiff claims she owned the Subject Property as she is the Borrower as delineated on the Deed of Trust and has lived within Subject Property from the inception of the Deed of Trust, prior to foreclosure and when the Notice of Default was issued. Plaintiff asserts that she received no mail or messages from Defendants. (Complaint, ¶ 28.) Plaintiff also alleges that the Notice of Default must be void because the foreclosure trustee that caused it to be recorded was not the trustee of record at the time of said recordation. (Complaint, ¶ 31). However, Defendants argue that the available facts refute Plaintiff’s claim, as they show that MTC Financial was substituted in as the trustee on April 15, 2016, before the Notice of Default was recorded in 2017. (Compare Substitution of Trustee and Notice of Default, attached to the RJN as Exhibits “D” and “E”, respectively.)   The Court takes judicial notice of the substitution of trustee, which is inconsistent with the allegations of the Complaint. 

            Defendants also argue that in California nonjudicial foreclosure sales are presumed to have been conducted regularly and the burden of proof rests with the party attempting to rebut this presumption. However, Defendants assert that Plaintiff has not met her burden because she concludes that a violation of Civil Code §2924(a)(1) occurred when “Clear Recon Corp failed to record a Substitution of Trustee” before causing the Notice of Default to be recorded, even though it is not just the foreclosure trustee whom may record a Notice of Default. (Complaint, ¶ 31.) Rather, section 2924 authorizes both instruments to be recorded by either “the trustee, mortgagee, or beneficiary, or any of their authorized agents.”

            As the Court is unaware who “borrower” Sue Bruccolieri is, the Court will hear oral argument as to who Sue Bruccolieri is and how she is connected to Plaintiff. This may be pertinent to how Plaintiff can validly amend the Complaint given the tentative ruling to sustain the Demurrer on standing grounds.

Violation of Civil Code § 2924.9

Standing

Defendants once again argue lack of standing to pursue the Cause of Action for Violation of Civil Code § 2923.9 under California Homeowner Bill of Rights (“HBOR”) because Plaintiff is not a “borrower”. Defendant argues that Plaintiff is not the borrower with respect to the Loan  based on the Deed of Trust, attached to RJN as Exhibit “A”. For this reason, Defendants argue that Plaintiff lacks standing to invoke either Civil Code §§2923.5 or 2924.9 of HBOR. The Court’s tentative ruling is to Sustain the Demurrer as discussed above in that Plaintiff has failed to allege proper standing, but the Court would grant leave to amend to include what is argued in the Opposition but not alleged in the pleading. 

Violation of the Truth in Lending Act, Title 12 CFR § 1024.35

Title 12 CFR states a servicer must provide the successor in interest written information with respect to any loan. Here, Plaintiff’s Complaint alleges that Defendants failed to provide her with any written information regarding the loan or attempt to assist in its policy and procedures to open up loss mitigation. (Complaint, ¶ 40.)

            Defendants again argue that Plaintiff does not have standing to bring this cause of action because she is not the borrower. Defendants also argue that Plaintiff has plead this cause of action in a conclusory manner. The Court’s tentative is to Sustain with leave to amend for the reasons outlined above.   

Violation of the Truth in Lending Act, Title 12 CFR § 1024.38

The statutory requirements for Title 12 C.F.R. § 1024.38 states that a servicer is required to confirm the potential identity and ownership interest in the property must be reasonable. Here, Plaintiff’s Complaint alleges that Defendants did not properly evaluate any loss mitigation applications or provide the successor in interest (Plaintiff) any information to complete the task of loss mitigation. (Complaint, ¶ 47.)

Defendants again argue that Plaintiff does not have standing to bring this cause of action because she is not the borrower. Defendants also argue that there is no private right of action to assert this claim, noting Section 1024.38 is entitled “General servicing policies, procedures, and requirements”, and the CFPB expressly explained in its official interpretation of the provision, “[t]he Bureau … will be able to supervise servicers within their jurisdiction to assure compliance with these requirements but there will not be a private right of action to enforce these provisions.” See 78 Fed.Reg. 10696, at 10697-10698; see also 10779 (“the Bureau is restructuring the final rule so that it neither provides private liability for violations of § 1024.38 nor contains a safe harbor limiting liability to situations where there is a pattern or practice of violations.”)

In opposition, Plaintiff argues that Fay Servicing performed no due diligence to confirm the identity of Plaintiff, which violated § 1024.38. But Plaintiff provides no authority for bringing this cause of action when the statute specifically notes that it does not provide for a private right of action. As such, because this cause of action is not recognized as viable under the law, the demurrer is sustained but without leave to amend.

Negligence

In order to state a claim for negligence, Plaintiff must allege the elements of (1) “the existence of a legal duty of care,” (2) “breach of that duty,” and (3) “proximate cause resulting in an injury.” (McIntyre v. Colonies-Pacific, LLC (2014) 228 Cal.App.4th 664, 671.)

Here, Plaintiff’s Complaint alleges Defendants have breached their duty of ordinary care and good faith to Plaintiff, and their duty not to put Plaintiff in a worse position when they: (1) failed to notify her about possible foreclosure and to wait 30 days after  notice to record a Notice of Default; (2) used a trustee servicer or beneficiary that lacked legal authority to conduct the Trustee’s sale; (3) failed to rescind all foreclosure activity upon the application for a loan modification application; (4) failed to provide Plaintiff with a Single Point of Contact; (5) Failed to notify Plaintiff of foreclosure alternatives within 5 business days after recording a Notice of Default; (6) failed to provide written acknowledgement of receipt of a loan modification application; and (7) violated Title 15 U.S.C. § 1641(g) by failing to contact Plaintiff after recording an Assignment of the Deed of Trust and notify the that it is the new beneficiary of the Deed of Trust. (Complaint, ¶¶ 54-61.) Plaintiff contends that Defendants owed her a duty of care because their activities violated affirmative statutory duties extrinsic to loan modification, and that their breach was the actual and proximate cause of Plaintiff’s damages. (Complaint, ¶ 62.)

Defendants’ demurrer notes Plaintiff has not offered any facts to suggest a duty owed to Plaintiff as distinct from a duty that may have been owed to Sue as distinct from Jennifer Bruccolieri.  Defendants assert that in general, a lender does not even owe a duty of care to its own borrower so long as said lender’s involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money. (Nymark v. Heart Fed. Sav. & Loan Assn., (1991) 231 Cal. App. 3d 1089, 1096.) Based on this, Defendants also argue that if there is no duty alleged, there is no breach of said duty.

In opposition, Plaintiff notes that a bank or lender may owe the borrower a duty not to act negligently in handling a loan modification application once it has undertaken to review the application. (citing, Lueras v. BAC Home Loans Servicing LP (2013) 221 Cal. App. 4th 49, 49, 63.) Plaintiff contends that each of the alleged statutory violations impose a duty under the law to comply.  The Demurrer is sustained with leave to amend on standing grounds.  The Court invites argument on the duty issue so the Court can determine whether leave to amend would or would not be proper for this claim. 

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 (usually but not always the trustor or mortgagor) was prejudiced or harmed; 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.” (Citrus El Dorado, LLC v. Chicago Title Co. (2019) 32 Cal.App.5th 943, 948, quotation marks and brackets omitted.)

            Here, Plaintiff’s complaint alleges that Defendants foreclosed on the subject property and are attempting to record a Trustee’s Deed Upon Sale. (Complaint, ¶ 67.) Plaintiff contends that Defendants wrongfully foreclosed as the Notice of Default is not compliant under Cal. Civ. Code 2924, et seq.; and did not avail Plaintiff to foreclosure alternatives in violation of HBOR and multiple Federal Truth in Lending statutes as alleged in Plaintiff’s other allegations. (Complaint, ¶ 68.) Plaintiffs assert that Defendants caused an illegal, fraudulent, or willfully oppressive sale of the Subject Property pursuant to a power of sale in a mortgage or deed of trust. (Complaint, ¶ 69.)  Defendants’ Request for Judicial Notice Exhibit F is a December 14, 2022 Notice of Trustee sale, an official public record that is inconsistent with the allegation in Plaintiff’s Complaint of an attempt to record such a notice. 

            Defendants argue that Plaintiff fails to state facts sufficient to state a cause of action for foreclosure for the reasons it argued in all other sections.  The Court sustains the Demurrer on standing grounds, and invites argument from Plaintiff as to whether the “attempt to record” allegation should be amended. 

Unfair Business Practices, Violation of Business & Professions Code § 17200, et seq.

            To set forth a claim for a violation of Business and Professions Code section 17200 (“UCL”), Plaintiff must establish Defendant was engaged in an “unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising” and certain specific acts. (Bus. & Prof. Code, § 17200.) A cause of action for unfair competition “is not an all-purpose substitute for a tort or contract action.” (Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 173.)

            Here, Plaintiff alleges that Defendants violated the HBOR by failing to timely and fairly evaluate Plaintiff for loan modification. (Complaint, ¶ 77.) Plaintiff alleges this is harmful to the public. Plaintiff also assert that Defendants engaged in unfair, unlawful, and fraudulent conduct when they implemented a severely flawed loss mitigation review process in which borrowers, like Plaintiff, are persuaded to reply on Defendants’ loan modification review process. (Complaint, ¶ 80.) Plaintiff contends that the process is purposefully lengthy so that loss mitigation and loan modification will not be timely provided. (Complaint, ¶ 81.) Plaintiff asserts that Defendants purposefully impeded timely loss mitigation denial or approval while expressing that Plaintiff are in review prevents Plaintiff from seeking other external loss mitigation options including abandoning the property and/or short sale. (Complaint, ¶ 82.)

            Defendants argue that Plaintiff’s claim fails to state sufficient facts to allege a cause of action for Violation of Business & Professions Code § 17200, et seq.. First, Defendants argue that there is no injury in fact here. Second, based on Plaintiff’s loan modification argument, Defendants argue that Plaintiff does not have any loan that can be modified by Defendant.

            In opposition, Plaintiff argues that if Plaintiff has sufficiently pled actionable conduct under any of the three bases for a UCL claim, the demurrer should be overruled. Plaintiff contends that she has pled fraudulent conduct under the UCL. Plaintiff asserts her Complaint adequately alleges that the acts of misrepresentation by Fay Servicing in that Plaintiff was under the impression that he would be granted a good faith modification review when Fay Servicing did not give Plaintiff a determination for a prolonged period of time. Plaintiff also asserts that she has sufficiently pled unfair activity in violation of he UCL because Fay Servicing’s acts of negligent servicing and blaming Plaintiff for his own mistakes, is unfair and resulted in prejudice against Plaintiff.

            Standing is still an issue under the UCL and HBOR, as the requirement of injury in fact is dependent on whether the proper Plaintiff has been named.  The Court sustains the Demurrer with leave to amend.

Cancellation of Written Instrument, Civil Code § 3412.

            Civil Code section 3412 provides that “[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 canceled.” “To prevail on a claim to cancel an instrument, a plaintiff must prove (1) the instrument is void or voidable due to, for example, fraud; and (2) there is a reasonable apprehension of serious injury including pecuniary loss or the prejudicial alteration of one’s position.” (U.S. Bank National Association v. Naifeh (2016) 1 Cal.App.5th 767, 778.)

            Here, Plaintiff’s Complaint alleges that she has had a reasonable belief that the Notice of Default, instrument no. 220170811627 and Notice of Trustee’s Sale, instrument no. 20221165303 are voidable or void ab initio. (Complaint, ¶ 93.) Plaintiff also claims that she has a reasonable apprehension that if these voidable or void ab initio recorded written instruments are left outstanding, they may cause serious injury to Plaintiff because of their violations of Civ. Code §§ 2923.5, 2924(a)(1), 2934a(a)(1), 2924a(e), 2923.6(c), 2923.7, 2924.9 and 2924.10. (Complaint, ¶ 94.)