Judge Upinder S. Kalra, Case Number: 23STCV18320, Date: 2024-03-26 Tentative Ruling

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MOVING PARTY: Defendant Newrez LLC dba Shellpoint Mortgage Servicing erroneously sued as Shellpoint Mortgage Servicing

1. Demurrer to the entire Complaint for failure to state sufficient facts constituting a cause of action.

1. Defendant’s Demurrer to the Verified Complaint is SUSTAINED in its entirety.

On August 2, 2023, Plaintiff Alec Alexander (Plaintiff) filed a Verified Complaint against Defendant Shellpoint Mortgage Servicing (Defendant) with nine causes of action for: (1) Breach of Contract; (2) Breach of Covenant of Good Faith and Fair Dealing; (3) Estoppel; (4) Negligence; (5) Fraudulent Misrepresentation; (6) Negligent Misrepresentation; (7) Fraudulent Promise without Intention to Perform; (8) Violation of Business & Professions Code § 17200, et seq; and (9) Accounting.

According to the Complaint, Plaintiffs owns property located at 22766 Saddle Peak Rd., Topanga, California 90290 (the Property) and has been paying a loan on the Property. Plaintiff alleges that Defendant began servicing the loan in/around April wrongly collected Forced Placement Insurance amounts. Plaintiff further alleges that while he worked to resolve the FPI issue, Defendant added another unauthorized fee to his mortgage payments. Plaintiff alleges Defendant structured their system in such as way as to keep homeowners, like Plaintiff, paying FPI when they do not need to.

On January 29, 2024, Defendant filed the instant demurrer. Oppositions were due on or before March 19, 2024. As of March 22, 2024, there is no opposition filed with the court.

Prior to filing a demurrer, the demurring party is required to satisfy their meet and confer obligations pursuant to Code of Civ. Proc. §430.41, and demonstrate that they so satisfied their meet and confer obligation by submitting a declaration pursuant to Code of Civ. Proc. §430.41(a)(2) & (3). The parties met and conferred on January 8, 2024, but were unable to resolve the issues. (Mika Decl. ¶¶ 3-6.) Accordingly, the meet and confer requirement is met.

A demurrer for sufficiency tests whether the complaint states a cause of action.¿(Hahn v. Mirda¿(2007) 147 Cal.App.4th 740, 747.) 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. …. The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.”¿(Hahn¿147 Cal.App.4th at 747.)¿¿

When considering demurrers, courts read the allegations liberally and in context, accepting the alleged facts as true. (Nolte v. Cedars-Sinai Medical Center (2015) 236 Cal.App.4th 1401, 1406.) Courts also consider exhibits attached to the complaint and incorporated by reference. (See Frantz v. Blackwell (1987) 189 Cal.App.3d 91, 94 (Frantz).)¿

The court grants Defendants’ request for judicial notice as to its own case file and Exhibit A. (Evid. Code § 452(c), (d), and (h); See Kalnoki v. First American Trustee Servicing Solutions, LLC (2017) 8 Cal.App.5th 23, 37.) However, the court only takes judicial notice of the foregoing documents only as to “the existence, content and authenticity of public records and other specified documents”; it does not take judicial notice of the truth of the factual matters asserted in those documents. (Dominguez v. Bonta (2022) 87 Cal. App. 5th 389, 400.)

Defendant contends that as a subsequent loan servicer, it lacks contractual privity with Plaintiff concerning the alleged deed of trust. Alternatively, Defendant argues that Plaintiff insufficiently alleged breach because Plaintiff did not allege that he provided proof of insurance to Defendant prior to adding the forced placed insurance under paragraph 5 of the deed of trust. Additionally, Defendant contends Plaintiff insufficiently alleged he fully performed under the deed of trust or that he sufficiently alleged damages. Plaintiff has not filed an opposition.

“To establish a cause of action for breach of contract, the plaintiff must plead and prove (1) the existence of the contract, (2) the plaintiff’s performance or excuse for nonperformance, (3) the defendant’s breach, and (4) resulting damages to the plaintiff. [Citation.]” (Maxwell v. Dolezal (2014) 231 Cal.App.4th 93, 97-98.) “A written contract may be pleaded either by its terms – set out verbatim in the complaint or a copy of the contract attached to the complaint and incorporated therein by reference – or by its legal effect. [Citation.] In order to plead a contract by its legal effect, plaintiff must ‘allege the substance of its relevant terms.’” (Heritage Pacific Financial, LLC v. Monroy (2013) 215 Cal.App.4th 972, 993.)¿¿

Upon reviewing the FAC, Plaintiff has not sufficiently alleged a claim for breach of contract. While Plaintiff attached a copy of the deed of trust (FAC, Exhibit A) and alleged that Defendant subsequently took over from the original Lender (FAC ¶ 12), Plaintiff failed to allege compliance with Paragraph 20. Paragraph 20 of the deed of trust states: “Neither Borrower nor Lender may commence . . . any judicial action . . . that arises from the other party’s actions pursuant to this Security Interest or that alleges that the other party has breached any provision of, or any duty owed by reason of, this Security Instrument, until such Borrower or Lender has notified the other party . . . of such alleged breach and afforded the other party hereto a reasonable period after the giving of such notice to take corrective action.”[1] (FAC, Exhibit A.) Plaintiff only alleges he performed by making payments under the deed of trust. (FAC ¶ 14.)

Accordingly, the court SUSTAINS Defendant’s demurrer to the first cause of action.

Second Cause of Action – Breach of Covenant of Good Faith and Fair Dealing

Defendant advances the same arguments as for the first cause of action. Plaintiff has not filed an opposition.

Every contract contains an implied covenant of good faith and fair dealing that neither party will do anything to interfere with the other party’s right to receive the benefits of the agreement. (Howard v. American Nat’l Fire Ins. Co. (2010) 187 Cal.App.4th 498, 528.)

The elements of a claim for breach of implied covenant of good faith and fair dealing are: (1) a contractual relationship; (2) plaintiff fulfilled their contractual obligations; (3) any conditions precedent to defendant’s performance occurred; (4) defendant unfairly interfered with plaintiff’s right to receive the benefits of the contract; and (5) plaintiff was harmed by defendant’s conduct. (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 36.)

As discussed above, Plaintiff failed to sufficiently allege that he fully performed under the deed of trust.

Accordingly, the court SUSTAINS Defendant’s demurrer to the second cause of action.

Defendant contends that Plaintiff alleged preliminary discussions and legal conclusions, not facts. Additionally, Defendant contends Plaintiff has not sufficiently alleged damages because the forced placed insurance funds were credited back to Plaintiff’s account. Plaintiff has not filed an opposition.

“The elements of promissory estoppel are (1) a clear promise, (2) reliance, (3) substantial detriment, and (4) damages “measured by the extent of the obligation assumed and not performed.” (Toscano v. Greene Music (2004) 124 Cal.App.4th 685, 692.)

Upon reviewing the FAC, Plaintiff has not sufficiently alleged a claim for estoppel. Notably, Plaintiff’s claim is based on conduct covered by the deed of trust which, as discussed above, requires Plaintiff to notify Defendant (as an alleged successor to the Lender) of the alleged breach. (FAC, Exhibit A, ¶ 20.) The court declines to develop Defendant’s other arguments as to how Plaintiff’s claim for estoppel fails.

Accordingly, the court SUSTAINS Defendant’s demurrer to the third cause of action.

Defendant contends that Plaintiff failed to sufficiently allege duty and damages. As to duty in particular, Defendant contends that Plaintiff’s claim is barred by the economic loss rule because the parties here are lender and borrower and Plaintiff did not allege conduct by Defendant intended to harm Plaintiff warranting an exception. Plaintiff has not filed an opposition.

A claim for negligence requires: (1) a legal duty owed to plaintiffs to use due care; (2) breach of that duty; (3) causation; and (4) damages. (County of Santa Clara v. Atlantic Richfield Co. (2006) 137 Cal.App.4th 292, 318.)

The same analysis for the third cause of action applies here because Plaintiff alleges breach of a duty owed under the deed of trust. (FAC ¶ 33.)

Accordingly, the court SUSTAINS Defendant’s demurrer to the fourth cause of action.

Defendant contends that Plaintiff failed to plead fraud with specificity and plead statements that truthfully described the process to reverse the forced placed insurance. Additionally, Defendant contends Plaintiff failed to plead a causal connection between the alleged misrepresentation and harm and Plaintiff has no damages because his account was credited. Plaintiff has not filed an opposition.

“The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or 'scienter'); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Lazar v. Superior Court¿(1996) 12 Cal.4th 631, 638.)¿¿

“In California, fraud must be pled specifically; general and conclusory allegations do not suffice…this particularity requirements necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tenders.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645; Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1469; Perlas v. GMAC Mort., LLC (2010) 187 Cal.App.4th 429, 434 [requiring plaintiffs who claim fraud against a corporation to allege the names of the persons who made the misrepresentations, their authority to speak for the corporation, to whom they spoke, what they said or wrote, and when it was said or written.]) Fraud allegations need not be liberally construed, general pleading of the legal conclusion of fraud is insufficient, and every element of the cause of action for fraud must be alleged fully, factually and specifically. (Wilhelm v. Pray, Price, Williams & Russell (1986) 186 Cal. App. 3d 1324, 1331.)¿

Accordingly, the court SUSTAINS Defendant’s demurrer to the fifth cause of action.

Defendant contends this claim fails because there was no duty and Plaintiff failed to otherwise sufficiently plead the requisite elements.[2] Plaintiff has not filed an opposition.

The elements of a claim for negligent misrepresentation are (1) the defendant made a false representation as to a past or existing material fact; (2) the defendant made the representation without reasonable ground for believing it to be true; (3) in making the representation, the defendant intended to deceive the plaintiff; (4) the plaintiff justifiably relied on the representation; and (5) the plaintiff suffered resulting damages. (Majd v. Bank of America, N.A. (2015) 243 Cal.App.4th 1293, 1307; National Union Fire Ins. Co. of Pittsburgh, Penn. V. Cambridge Integrated Services Group, Inc. (2009) 171 Cal.App.4th 35, 50.) As in negligence, there is also a requirement that legal duty exists imposed by statute, contract, or otherwise. (Bock v. Hansen (2014) 225 Cal.App.4th 215, 228.) This is a question of law. (Ibid.) Fraud and negligent misrepresentation must be pleaded with particularity, which means the pleading “must set forth how, when, where, to whom, and by what means the representations were made.” (SI 59 LLC v. Variel Warner Ventures, LLC (2018) 29 Cal.App.5th 146, 155; Charnay v. Cobert (2006) 145 Cal.App.4th 170, 184-185, fn. 14; see Foster v. Sexton (2021) 61 Cal.App.5th 998, 1028 [citing Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.])

Accordingly, the court SUSTAINS Defendant’s demurrer to the sixth cause of action.

Seventh Cause of Action – Fraudulent Promise Without Intention to Perform

Defendant did not directly include argument here. It appears to the court, however, that this claim is substantially identical to the fourth cause of action for fraudulent misrepresentation. As such, the same analysis applies.

Accordingly, the court SUSTAINS Defendant’s demurrer to the fifth cause of action.

Eighth Cause of Action – Violation of Business & Professions Code § 17200

Defendant contends Plaintiff failed to allege that he suffered monetary or property loss as a result of the alleged conduct and that he failed to allege he did not cause the alleged conduct by failing to allege he provided proof of insurance prior to Defendant instituted the forced placed insurance. Additionally, Defendant contends that Plaintiff failed to allege unlawful conduct. Plaintiff has not filed an opposition.

California Business and Professions Code section 17200 prohibits “any unlawful, unfair or fraudulent business act or practice.” (Bus. & Prof. Code § 17200; see Clark v. Superior Court (2010) 50 Cal.4th 605, 610.) A business practice is unfair when it offends an established public policy or when the practice is immoral, unethical, oppressive, unscrupulous, or substantially injurious to consumers." (Community Assisting Recovery, Inc. v. Aegis Security Ins. Co. (2001) 92 Cal.App.4th 886, 894.) A business practice is unlawful if it violates another law. (Berryman v. Merit Property Management, Inc. (2007) 152 Cal.App.4th 1544, 1554.) A business practice is fraudulent if “members of the public are likely to be deceived." (See Wang v. Massey Chevrolet (2002) 97 Cal. App. 4th 856, 871.) “A plaintiff alleging unfair business practices . . . must state with reasonable particularity the facts supporting the statutory elements of the violation.” (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 619.)¿

Accordingly, the court SUSTAINS Defendant’s demurrer to the eighth cause of action.

Defendant contends that Plaintiff failed to allege misconduct justifying an accounting when he is not owed any money. Plaintiff has not filed an opposition.

“A cause of action for accounting requires a showing of a relationship between the plaintiff and the defendant, such as a fiduciary relationship, that requires an accounting or a showing that the accounts are so complicated they cannot be determined through an ordinary action at law.” (Fleet v. Bank of America N.A. (2014) 229 Cal.App.4th 1403, 1413.) “‘An action for accounting is not available where the plaintiff alleges the right to recover a sum certain or a sum that can be made certain by calculation.’” (Id. (quoting Teselle v. McLoughlin (2009) 173 Cal.App.4th 156, 179).)

“The right to an accounting can arise from the possession by the defendant of money or property which, because of the defendant’s relationship with the plaintiff, the defendant is obliged to surrender.” (Teselle v. McLoughlin (2009) 173 Cal.App.4th 156, 179-80.)

Accordingly, the court SUSTAINS Defendant’s demurrer to the ninth cause of action.

Leave to amend should be liberally granted if there is a reasonable possibility an amendment could cure the defect.¿ (County of Santa Clara v. Superior Court (2022) 77 Cal.App.5th 1018,1035.)¿ The Plaintiff has the burden of demonstrating that leave to amend should be granted, and that the defects can be cured by amendment. (“Plaintiff must show in what manner he can amend his complaint and how that amendment will change the legal effect of his pleading.” (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349).

Here, Plaintiff has not requested leave to amend from the court.[3] However, in an exercise of caution, the court will allow Plaintiff to present oral argument at the hearing. The court is inclined to deny leave to amend.

1.Defendant’s Demurrer to the Verified Complaint is SUSTAINED in its entirety.

[1] The court may consider Exhibit A’s contents because it is attached to the Verified Complaint and incorporated by reference. (Frantz v. Blackwell (1987) 189 Cal.App.3d 91, 94.)

[2] Essentially, this claim revisits the arguments for negligence (economic loss rule bars claim) and fraud (lack of specificity).

[3] Noting Defendant’s other arguments on demurrer that are not addressed here, the court is skeptical that Plaintiff can amend to cure those defects.