Judge: Shirley K. Watkins, Case: 21VECV01341, Date: 2023-02-06 Tentative Ruling

If ALL parties submit on the tentative, then no appearance is necessary unless some other matter (i.e., Case Management Conference) is on calendar. It is not necessary to call the court to request oral argument. Oral argument is permitted on all tentative rulings.

Case Number: 21VECV01341    Hearing Date: February 6, 2023    Dept: T

            [TENTATIVE] ORDER:  Defendant Shellpoint Mortgage Servicing’s Demurrer to the Second Amended Complaint is SUSTAINED WITHOUT LEAVE TO AMEND in Part and OVERRULED in Part.  The demurrer is SUSTAINED WITHOUT LEAVE TO AMEND as to the first and second causes of action and OVERRULED as to the third and fourth causes of action.  Answer to the SAC shall be filed within 20 days.

            Plaintiff Robert Allen’s Requests for Judicial Notice filed on January 25, 2023, and January 26, 2023 are GRANTED but not as to any hearsay or facts in dispute.

Introduction

            Defendant Shellpoint Mortgage Servicing (Defendant) demurred to Plaintiff Robert Allen’s (Plaintiff) Second Amended Complaint (SAC.)  Defendant demurred to all four causes of action (COA) alleged in the SAC.

            Procedure

            Plaintiff filed a Request for Judicial Notice on January 25, 2023 (RJN 1) and another on January 26, 2023 (RJN 2.)  RJN 1 requested notice of the Notice of Trustee Sale recorded on December 12, 2022.  Courts may take judicial notice of recorded deeds, but not the hearsay or disputable facts asserted in them.  (Poseidon v. Woodland (2007) 152 Cal.App.4th 1106, 1117.)  Based upon this legal authority, the Court takes judicial notice of the Notice of Trustee Sale but not as to any hearsay or facts in dispute. 

RJN 2 requested notice of correspondence between the parties, specifically Defendant’s denial of a Loan Modification Application (LMA) on December 12, 2022 and a new trustee sale date of February 9, 2023.  The new trustee sale date is a fact and proposition that is not reasonably subject to dispute.  (Evid. Code sec. 452(h).)  The Court notes that Defendant did not dispute that a new sale date is set for February 9, 2023.  Because the new trustee sale date is not reasonably subject to dispute, the Court takes judicial notice of the new trustee sale date within the correspondence.  The Court does not take judicial notice of the correspondence.

            Discussion 

The first COA for a Civil Code section 2923.6 violation alleged violations of two subsections: Subsection (c) which prohibits recording a Notice of Default (NOD) or Notion of Trustee Sale (NTS) or conducting a trustee sale when a complete LMA is pending; and Subsection (f)(2) which requires a servicer to provide specific reasons for the denial of an LMA.  (SAC pars. 51, 65, 66 & 73, 74, 76.)  The second COA for a Civil Code section 2924.10 violation alleged that Defendant’s written acknowledgement of receipt of the LMA did not include the information delineated in subsection (a)(1)-(4).  (SAC pars. 84-87.)  These code violations are collectively referred to as the Homeowners Bill of Rights (HBOR) claims.

Defendant re-asserted, in conclusory fashion, that there are no facts alleged to show that Plaintiff submitted a “completed” LMA.  (Civ. Code sec. 2923.6(h).)  Defendant’s argument was previously asserted in their demurrer to the First Amended Complaint (FAC.)  The Court reviewed the argument and ruled against Defendant on the issue.  Defendant’s failure to apply any new allegations to law showed that the argument is the same argument previously asserted.  The Court’s prior review of the issue and prior ruling stands.  The argument is again not found to be persuasive.

            Defendant then argued that the first two COAs for violations of the HBOR failed to allege sufficient facts to show materiality of the alleged violations.  (Civ. Code. Sec. 2924.12(b).)  This argument was reviewed at the prior demurrer to the FAC hearing and the Court held that the allegations were insufficiently pled to show materiality.  As to the first COA’s claim that Defendant violated Civil Code section 2923.6(c), Plaintiff added new facts to purportedly support the materiality of a new violation and Defendant failed to address these new allegations.  Plaintiff added facts to allege that a new LMA was submitted in Fall 2022 (2022 LMA.)  (SAC par. 53.)  Plaintiff asserted that Defendant recorded a new NTS on December 12, 2022 which set a new Trustee Sale date of January 12, 2023.  (RJN Exh. A.)  The Trustee Sale date was then postponed by Defendant to February 9, 2023 because the December 12, 2022 NTS was admittedly recorded “prematurely.”  (RJN Exh. B.)  (See Civ. Code sec. 2923.6(e)(2): 15-day requirement.)  The correspondence also stated that the 2022 LMA was denied on December 6, 2022 and a subsequent appeal was also denied.  Plaintiff appears to have sufficiently pled a material violation of Civil Code section 2923.6(e)(2) because the alleged facts show that Defendant recorded the December 12, 2022 NTS within six days of the December 6, 2022 denial of Plaintiff’s appeal as to the 2022 LMA.  However, the correspondence is dated January 26, 2023 (i.e., past the initial January 12, 2023 trustee sale date) which would show that the sale did not proceed.  Civil Code section 2924.12(c) provides a “safe harbor” for servicers:  “A mortgage servicer ... shall not be liable for any violation that it has corrected and remedied prior to the recordation of the [foreclosure sale] ....”.  By the statute’s terms, a temporary disruption of the normal foreclosure process that is corrected and causes no lasting harm to the borrower's rights will give rise to no liability.  Based upon Defendant’s January 26, 2023 correspondence, Defendant corrected/remedied the improper recording of the December 12, 2022 NTS and corrected/remedied the premature sale date by postponing it to February 9, 2023.  Due to the allegations showing Defendant’s correction, there is insufficient fact pleading to plead a material violation of Civil Code sec. 2923.6.  The additional allegations related to the denials of the 2022 LMA are insufficient to plead facts to support an HBOR violation under Civil Code sec. 2923.6.

            As to the first COA’s claim of Civil Code sec. 2923.6(f)(2), Defendant re-asserted that the allegations are insufficient to show a material violation as to the reasons for investor disallowance.  The Court previously ruled upon this issue in favor of Defendant.  Plaintiff failed to cite to any additional facts to show that the pleading defect was cured in the SAC.  To reiterate, Plaintiff alleged that Defendant’s October 29, 2021 denial of Plaintiff’s first LMA (2021 LMA) was based upon an insufficient housing payment to income ratio.  The Court previously held that the reason provided by Defendant was sufficient to comply with the statute.  Without more factual allegations, Plaintiff failed to cure the pleading defect.

            The demurrer to the first COA is SUSTAINED WITHOUT LEAVE TO AMEND.

            On the second COA for violation of Civil Code section 2924.10, the Court previously sustained the demurrer to the FAC on the grounds that Plaintiff alleged conflicting facts as to confirmation of receipt of the 2021 LMA.  Plaintiff has now clarified that Defendant “verbally” confirmed receipt of the 2021 LMA.  (SAC par. 86.)  However, Plaintiff then alleged that Defendant failed to provide written acknowledgment of the 2021 LMA within five days, which lead to delay/confusion as to what Defendant had received.  (Id.)   Plaintiff added allegations that Defendant failed to timely communicate information regarding the LMA or a timeline of the review process and its associated deadlines.  (SAC par. 87.)  Reviewed in a vacuum, the allegation would show a material violation because, in general, failing to communicate the process/deadlines in submitting an LMA or an appeal would be a disruption to the loan modification process or would be a harm to Plaintiff in connection with Plaintiff’s efforts to avoid foreclosure.  However, Plaintiff alleged that their two LMAs were “completely” submitted; Defendant denied the two LMAs not on procedure or for lack of documentation but for insufficient housing payment to income ratio; Plaintiff filed appeals to both denials; and Defendant processed both appeals to ultimate denials.  These allegations contradict Plaintiff’s claim that Defendant did not communicate the LMA process or appeal process since Plaintiff successfully submitted two LMAs through two appeals.  The demurrer argument against the second COA is persuasive.

            The demurrer to the second COA is SUSTAINED WITHOUT LEAVE TO AMEND.

            As to the third COA for violation of Business and Professions Code sec. 17200 (UCL), the Court previously sustained the demurrer to the FAC because UCL COA is dependent upon the HBOR COAs.  Because the HBOR COAs were insufficiently supported with factual allegations, the UCL COA is also seen to be defectively pled.  Plaintiff again “borrows” the HBOR violations to plead the unlawful and fraud prongs of the UCL COA.  (SAC pars. 97 and 98.)  For these claims, the demurrer is persuasive.  However, Plaintiff also alleged that the UCL claim is grounded upon improper fees charged to Plaintiff but never incurred by Defendant.  (SAC pars. 20-30, and 99.)  On this factual allegation, Plaintiff sufficiently pleads specific facts to support the fraud or unfair prongs of UCL. 

            Defendant argued that Plaintiff cannot plead facts to show an injury-in-fact because Plaintiff still possesses the property/foreclosure has not occurred.  However, Defendant’s argument misconstrued the injury being alleged.  Plaintiff did not allege the injury to be the foreclosure/loss of property.  Plaintiff alleged the injury to be payment of improper fees.  Defendant’s argument may be applicable to the HBOR claims.  However, the HBOR claims are not sufficiently alleged to support the UCL COA.  The only remaining claim supporting UCL is the allegations related to improper fees being charged if the foreclosure is conducted.  Because Plaintiff alleged that Defendant is intent on proceeding with the foreclosure, Plaintiff sufficiently alleged that the improper fees will be imminently charged.  Defendant’s arguments against the UCL COA are not persuasive.

            The demurrer to the third COA is OVERRULED. 

            Defendant re-asserted that Defendant owes Plaintiff no money and an accounting claim requires a fiduciary relationship.  However, these arguments were reviewed by the Court in the demurrer to the FAC and found unpersuasive.  Arguing the same issues again does not change the analysis from the ruling on the prior demurrer, especially when no new facts are alleged.  The arguments are again not sufficient to sustain a demurrer.

            Defendant then argued that the accounting COA must be tethered to an actionable claim.  However, as stated above under the review of the UCL COA, Plaintiff has sufficiently pled an actionable claim based upon the allegation that Defendant charged improper fees.  Defendant’s argument did not meet its burden.

            The demurrer to the fourth COA for accounting is again OVERRULED. 

            ANSWER TO SAC DUE WITHIN 20 DAYS.

            IT IS SO ORDERED, CLERK TO GIVE NOTICE.